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:

Linnaeus

Carl Linnaeus, an 18th-century Swedish botanist, physician, and zoologist, known for creating the system of classification for organisms.

Biological Classification

The scientific system of categorizing living organisms into hierarchical groups based on their evolutionary relationships and characteristics.

Species

A group of living organisms consisting of similar individuals capable of exchanging genes or interbreeding and are classified together as sharing a common lineage.

Mammals

Warm-blooded vertebrate animals characterized by the presence of mammary glands which females use to feed their young, as well as fur or hair.