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Answer to Question #228231 in Macroeconomics for fatima

Question #228231

What is a liquidity trap? If the economy was stuck in one, would you advise the use of mon

etary or fiscal policy?


1
Expert's answer
2021-08-23T13:12:54-0400

Liquidity trap is a contractionary situation in the economy where interest rates are low and saving rates are high.

Monetary policy is ineffective in liquidity trap.



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