When an Economy Is in a Deflationary Spiral, and Nominal

question 82

Multiple Choice

When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:

• A) for the Fed to print money
• B) for the Fed to buy financial securities
• C) to use fiscal stimulus
• D) All of these answers are correct.
• E) None of these answers are correct.

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Definitions:

Dialectical Reasoning

A method of argument that involves a process of logical reasoning and dialogue to explore contradictions and opposing viewpoints.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making.

Mindless Processing

Describes cognitive activities that occur without conscious awareness or effort, often in response to familiar stimuli.

Automatic Pilot

A mode of operation where tasks are performed unconsciously or without active thought, often used metaphorically to describe habitual or rote behavior.