Economists Who Are Skeptical About the Relevance of "Liquidity Traps

question 192

Multiple Choice

Economists who are skeptical about the relevance of "liquidity traps" argue that ss

• A) a central bank continues to have tools to stimulate the economy, even after its interest rate target hits its lower bound of zero.
• B) a central bank continues to have the option of committing itself to future monetary contraction, even after its interest rate target hits its lower bound of zero.
• C) a central bank can greatly reduce the likelihood of a liquidity trap by setting the target rate of inflation at zero.
• D) while the concept of a liquidity trap is theoretically possible, nothing resembling a liquidity trap ever has been observed in the real world.

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Definitions:

Sales Budget

A detailed plan outlining the expected revenues from the sale of products or services over a specific period, serving as a roadmap for the company's sales strategy and performance expectations.

Finished Goods Inventory

The stock of completed products that are ready to be sold by a manufacturing company.

Sales Forecast

An estimation of the future sales of a product or service, based on historical sales data, market trends, and economic factors, crucial for planning and budgeting.

Production Units

A measure of output from a production process, quantified in units.