Which of the Following Is True About a Liquidity Trap

question 104

Multiple Choice

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

• A)​Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities.
• B)​Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates.
• C)​The Fed cannot easily reduce the fed funds interest rate.
• D)​All of the above are true.

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Definitions:

Sarbanes-Oxley Act

A U.S. federal law enacted in 2002 designed to protect investors from fraudulent financial reporting by corporations, improving the accuracy and reliability of corporate disclosures.

Corporate Disclosures

Information that a company is required to make public, revealing important financial, operational, or governance details to stakeholders.

NAFTA

The North American Free Trade Agreement, a treaty between the United States, Canada, and Mexico that eliminated most tariffs on trade between them.

Corporate Governance

The system of rules, practices, and processes by which a company is directed and controlled, balancing the interests of stakeholders.