During Japan's economic slump in the early 1990s, monetary policy:
a. was highly effective at stimulating income.
b. was caught in a liquidity trap as a result of high inflation and interest rates.
c. was ineffective because of a liquidity trap caused by near zero interest rates.
d. was never even attempted.
e. was the cause of the slump.
Question 2
Ricardian Equivalence theory assumes that ________.
A) an anticipated increase in the income of future generations will reduce the amount that is saved today on their behalf
B) government spending remains constant
C) many people are subject to borrowing constraints
D) tax cuts have a positive impact on aggregate supply
