Which of the Following Is False About a Liquidity Trap

question 101

Multiple Choice

Which of the following is false about a liquidity trap situation:​

• A)​The Fed could not appreciably raise short term interest rates.
• B)​If the Fed added reserves to the banking system, it would have little effect on investment.
• C)​Traditional monetary policy would be relatively weak in its effects on aggregate demand.
• D)​Expansionary monetary policy would tend to increase excess reserves in the banking system.

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