Suppose that the economy is operating below the full employment level of real GDP. If a liquidity trap exists, a(an) ________ policy would be most effective for solving the problem.
A. expansionary monetary policy
B. contractionary fiscal policy
C. expansionary fiscal policy
D. contractionary monetary policy
Answer: C
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The Value Added Tax (VAT) is
A. not often used in the United States. B. a percentage tax. C. added at each stage to production. D. all of these answer options are correct.
You have a bond that pays $60 per year in coupon payments. Which of the following would result in an increase in the price of your bond?
A) The price of a share of stock in the company falls. B) Coupon payments on newly-issued bonds fall to $50 per year. C) Coupon payments on newly-issued bonds rise to $80 per year. D) The likelihood that the firm issuing your bond will default on debt increases.
A shortcoming of swaps that has led to the domination of the swaps market by large firms and financial institutions is
A) the lack of privacy. B) need to assess creditworthiness. C) desire for more flexibility. D) limited size of the market.
If the nominal interest rate is 6% and the inflation rate is 3%, the real interest rate is
a. 2% b. 3% c. 6% d. 9%