Register New Player
Welcome to our world of fun trivia quizzes and quiz games:
The Liquidity 'Trap'ped?
"In an economic environment bubbling with uncertainty following The Great Recession, the mighty (puny?) economists have settled on the liquidity trap as one of the major mischief makers. Do you know much about this monetary sensation?"
15 Points Per Correct Answer - No time limit
What happens to public preferences with regards to bonds and money during a liquidity trap at the zero lower bound?
The demand for bonds vis-a-vis money increases due to capital flight for safe assets
They seem almost like interchangeable assets because of no returns
The demand for money vis-a-vis bonds increases due to weak economic performance
The demand for both fall as people use their savings to pay off previous debt
When the liquidity trap is in place, what kind of stimulative policy is ineffective?
Conventional Monetary Policy
Balanced Budget Policy
How does conventional monetary policy, which in the US means injecting cash into the economy by the Federal Reserve by buying bonds from the market, usually stimulate the economy?
By lowering interest rates, thus giving an incentive for businesses to invest and consumers to borrow and spend
By increasing the price of government bonds which improves the currency and the nation's international competitiveness
By lowering the debts of the private sector and allowing them to spend more
By increasing the interest rates, thus giving people an incentive to save more through a higher rate of return on their savings
Why is a Fiscal Stimulus effective in a liquidity trap?
It increases the confidence in the economy
The infrastructure put in place replaces missing private sector investment
Since the interest rates won't rise, it fills the aggregate demand gap as there is no crowding out of the private sector
The resulting rise in inflation lowers the debt burden of the private sector
Whose masterful theories, later polished by the technical master John Hicks, led to the first real insights into the liquidity trap?
John Maynard Keynes
Which nation's economy suffered the wrath of the liquidity trap during the 1990s, causing, as some say, the 'lost decade' of growth?
What usually brings about the onset of a liquidity trap?
An Aggregate Demand Crisis
A Financial Crisis
A Balance Sheet Crisis
Which Taiwanese economist is an expert on the Balance Sheet Recession, and the author of a 2011 research paper titled "The world in balance sheet recession: Causes, cure, and politics" which went viral on the web in the economic/financial circles?
What monetary phenomenon is accompanied with a liquidity trap?
In regular times, increased aggregate __________ is usually good for GDP growth in the medium run, and even if it is too high, it does not do too much damage. In a liquidity trap brought on by a balance sheet recession, however, increased ___________ can do a lot of damage to both the short run and the medium run growth rate of GDP. Fill in the blank.
Copyright, FunTrivia.com. All Rights Reserved.
Legal / Conditions of Use
Compiled May 24 13