If a Country's Nominal Interest Rate Is Zero, Then

question 113

Multiple Choice

If a country's nominal interest rate is zero, then

• A) the country's economy is in a liquidity trap.
• B) exchange rates with other countries are likely to decline.
• C) exchange rates with other countries are likely to increase.
• D) monetary policy is likely to be very effective in stimulating the economy.
• E) the country's economy has achieved monetary equilibrium.

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