Multiple Choice
If an economy is in a liquidity trap, then the nominal interest rate is ________ and the only effective policy that can be used to stimulate the economy is ________.
A) zero or negative; expansionary fiscal policy
B) zero or negative; expansionary monetary policy
C) high and rising; contractionary monetary policy
D) high and rising; expansionary monetary policy
E) high and rising; expansionary fiscal policy
Correct Answer:
Verified
Correct Answer:
Verified
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