If a liquidity trap does exist, then ______ policy will not be effective in increasing income when interest rates reach very ______ levels.
A) monetary; high
B) monetary; low
C) fiscal; high
D) fiscal; low

Question

Quizplus · Accepted Answer

A liquidity trap occurs when interest rates are low and savings rates are high, rendering monetary policy ineffective in stimulating economic growth.

If a Liquidity Trap Does Exist, Then ______ Policy Will