A liquidity trap arises when

Assignment Help Business Economics

Reference no: EM131385535

1. If there is too much deflation:

people will switch from money to real assets.

the nominal interest rate will be constrained by the zero interest rate bound.

lenders will be harmed.

aggregate demand will increase.

2. A liquidity trap arises when:

debt deflation reduces aggregate demand.

conventional monetary policy is ineffective because nominal interest rates are up against the zero lower bound.

expansionary monetary policy has been used to keep the actual unemployment rate below its natural rate.

the expected inflation rate equals the actual inflation rate.

Reference no: EM131385535

Questions Cloud

Find the minimum level of output needed to deter entry : Stackelberg and Limit Pricing. Consider the Limit pricing and Stackelberg models done in class in which the incumbent chooses capacity first and entrant then chooses whether to enter or not. Find the minimum level of output needed to deter entry (qID..

The economist definition of investment : The difference between the price the firm sells a good for and the price it paid other firms for intermediate goods is called. The annual charge that estimates the amount of capital equipment used up in each year’s production is called. Which of the ..

The quantity of goods and services produced in the economy : Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant? Which of the following do we subtract from GNP to obtain NNP? Over time prices may change relative to each other, In order..

The income elasticity of demand : Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true? If the prices of computer tablets rise, we would expect the number of tablet covers purchased to: The income elasticity of demand

A liquidity trap arises when : If there is too much deflation: A liquidity trap arises when:

Suppose that firms choose prices simultaneously : Differentiated Bertrand. Consider a Differentiated Bertrand model in which demand is given by q1 = 100 – p1 + p2 and q2 = 100 – p2 + p1 for firm 1 and firm 2 respectively and where both firms faced zero fixed costs and constant marginal cost = c. Sup..

Is profit equal to producer surplus here : Demand is defined by P=250-2Qd. Suppose that marginal cost is MC=Q where Q is the quantity produced by the monopoly. Find the monopoly quantity. Find the monopoly price. Is profit equal to producer surplus here?

Goods is likely to have the highest income elasticity : When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________. Which of the..

What is the subgame perfect equilibrium for the game : Consider the following (not so unrealistic) scenario for a conflict between Iraq and the United States in the Persian Gulf area. Iraq moves first and decides whether or not to invade Kuwait. what is the subgame perfect equilibrium for the game?

User Account

All Pages