A liquidity trap is
a. the vertical portion of the LM schedule.
b. the horizontal portion of the LM schedule.
c. a situation where a given change in the money stock induces a large reduction in the interest rate.
d. Both a and c
e. Both b and c
B
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Market failure happens when a market does not generate the most efficient outcome
Indicate whether the statement is true or false
Consider the market for broccoli. If the price of a pound of broccoli increases, what happens to the supply of broccoli?
A) The supply of broccoli decreases. B) The supply of broccoli increases. C) There will be no change in the supply of broccoli, but instead there is an increase in the quantity supplied of broccoli. D) There will be no change in the supply of broccoli, but instead there is a decrease in the quantity supplied of broccoli.
In England the Thatcher government substituted a "poll tax" for the local property tax. People took strong exception to the tax, which is basically a head or "lump sum" tax. The principle of taxation such a tax violates is called
a. the benefits principle. b. the excess burden principle. c. the ability-to-pay principle. d. the constitutional principle.
Supply-side tax cuts are designed to
A. Shift the Phillips curve to the right. B. Increase the equity of the tax system. C. Remove as much disposable income as possible from the economy. D. Reduce marginal tax rates.