If a country's nominal interest rate is zero, then A) the ...

[09madisonrousseau09]

If a country's nominal interest rate is zero, then
 
  A) the country's economy is in a liquidity trap.
  B) exchange rates with other countries are likely to decline.
  C) exchange rates with other countries are likely to increase.
  D) monetary policy is likely to be very effective in stimulating the economy.
  E) the country's economy has achieved monetary equilibrium.

Question 2

Contrast the crisis in Poland and Russia. Explain why the Polish economy has done better?
 
  What will be an ideal response?

[kescobar@64]

Answer to Question 1

A

Answer to Question 2

By the end of the 1990s, a handful of East European economies including Poland, Hungary, and the Czech Republic had made successful transitions to the entrepreneur order. Not surprisingly each of these countries was geographically close to the European Union (EU) and had a recent tradition, of industrial capitalism, including a body of contract and property law. In regards to Russia, by 1990 the Russia's government was unable to collect taxes or even to enforce basic laws; the country was riddled with corruption and organized crime. That is why the measured output got smaller progressively and the inflation was hard to control, so at the end of the 1990s most Russians were substantially worse off than under the old Soviet regime. As we can see, Poland's economy started producing more money to growth and decrease inflation because they were having business with potential firms.