A Liquidity Trap Occurs When

question 89

Multiple Choice

A liquidity trap occurs when:

• A) banks have too much currency and close their doors to new customers.
• B) the central bank mistakenly prints too much money, generating hyperinflation.
• C) interest rates fall so low that monetary policy is no longer effective.
• D) dams and locks are built to prevent flooding.

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Definitions:

Visceral Layer

The inner layer of a two-part serous membrane that covers internal organs.

Pleura

A double-layered membrane surrounding the lungs and lining the chest cavity, facilitating lung movement and serving as a protective layer.

Serous Membrane

A serous membrane is a thin layer of tissue that lines certain internal cavities of the body, secreting a serous fluid that lubricates and reduces friction between organs.

Serous Fluid

A clear, thin fluid that lubricates the surfaces between two membranes, reducing friction from muscle movement.