When an economy is in a liquidity trap
A) monetary policy cannot be used to influence the exchange rate.
B) monetary policy can be used to drive interest rates down, but not to drive them up.
C) there is an excess demand for bonds.
D) people and institutions avoid holding cash balances.
E) it can escape only by introducing a hard, or illiquid, currency.
A
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Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as:
a. price leadership. b. a cartel. c. monopolistic competition. d. a market with kinked demand.
The fact that there are fewer and fewer potential investments that will generate returns high enough to make the cost of paying back a loan worthwhile is reflected in the:
A. upward-slope of the supply curve in the market for loanable funds. B. downward-slope of the supply curve in the market for loanable funds. C. upward-slope of the demand curve in the market for loanable funds. D. downward-slope of the demand curve in the market for loanable funds.