The liquidity trap exists when
A) the IS-curve is vertical
B) the LM-curve is vertical
C) the LM-curve is horizontal
D) an increase in government spending is always fully crowded out
E) money demand is completely insensitive to changes in the interest rate
Correct Answer:
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Q4: A change in which of the following
Q5: If the Fed undertakes open market sales,
Q6: Fiscal policy is weakest and monetary policy
Q7: Monetary policy becomes more effective as
A)the marginal
Q8: In an IS-LM model, if we assume
Q10: In the classical case,
A)the fiscal policy multiplier
Q11: If we were in a liquidity trap,
A)investment
Q12: One side effect of expansionary fiscal policy
Q13: If money supply is held constant, a
Q14: The view that "only money matters" is
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