Recall Application 1, "Avoiding a Liquidity Trap," to answer the following questions:
-Which of the following most likely caused the low short- term interest rates in 2008?
A) The recession caused by the financial crisis forced the Fed to raise the interest rates.
B) The inflation caused by the financial crisis forced the Fed to raise the interest rates.
C) The recession caused by the financial crisis forced the Fed to lower the interest rates.
D) The inflation caused by the financial crisis forced the Fed to lower the interest rates.

Question

Quizplus · Accepted Answer

The recession caused by the financial crisis forced the Fed to lower the interest rates in an attempt to stimulate economic growth and avoid a liquidity trap.

Recall Application 1, "Avoiding a Liquidity Trap," to Answer the Following