A _____is a situation in which additions to an economy's monetary base do not lead to an increase in the economy's
Money supply or decline in the interest rate.
A)liquidity trap
B)recession
C)financial crisis
D)credit crunch

Question

A _____is a situation in which additions to an economy's monetary base do not lead to an increase in the economy's
Money supply or decline in the interest rate.
A)liquidity trap 
B)recession 
C)financial crisis 
D)credit crunch

Quizplus · Accepted Answer

This situation is called a liquidity trap, where the economy is experiencing low demand and interest rates are already close to zero, so increasing the monetary base has little effect on increasing the money supply or lowering interest rates.

A _____Is a Situation in Which Additions to an Economy's