A Bad Deflation Such as That Experienced by Japan Over

question 49

Multiple Choice

A bad deflation such as that experienced by Japan over the past decade poses problems

• A)for monetary policy because it lowers the real interest rate below the nominal interest rate.
• B)for fiscal policy because it raises the ratio of public debt to nominal GDP even if public debt is fixed.
• C)for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves rightward at the same time.
• D)for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves leftward at the same time.

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Definitions:

Limited Funding

A situation where financial resources are insufficient to meet the needs or ambitions of a project, organization, or initiative.

Police Corruption

Dishonest or fraudulent conduct by police officers, typically involving bribery or the misuse of power.

Drug Traffickers

Individuals involved in the illegal distribution and sale of drugs.

Mollen Commission

An independent commission established to investigate corruption within a police department, particularly noted for its work with the New York City Police Department in the 1990s.