When There Is a Liquidity Trap, When the Fed Adds

question 137

True/False

When there is a liquidity trap, when the Fed adds bank reserves, there is a large effect on borrowing, investment and aggregate demand.

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Definitions:

Dividend Payout Ratio

A financial metric that shows the percentage of a company's earnings paid to shareholders as dividends, reflecting the company's dividend policy and financial health.

Maximum Rate of Growth

The highest possible expansion rate that a business can achieve without obtaining additional financing from external sources.

Sustainable Rate Of Growth

The maximum rate at which a company can grow its revenues without needing to obtain additional financing.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the costs of goods sold, representing the proportion of sales that turns into profit.