What is the appropriate monetary policy response to a situation with deficient financial liquidity, when there is a liquidity trap?
A) an open market sale of government bonds
B) a decrease in the interest rate on reserves
C) an open market purchase of government bonds
D) an increase in the interest rate on reserves
Question 2
The recession of 2008-2009 demonstrated that ________.
A) consumption is especially sensitive to changes in the retirement age
B) changes in wealth can be a major source of fluctuations in consumption
C) as consumers get older, they tend to exhaust all their savings
D) permanent income is something of a misnomer
