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In analyzing the Great Depression, Keynes theorized that when the Fed conducted open market purchases, sellers held on to the funds instead of depositing them
In analyzing the Great Depression, Keynes theorized that when the Fed conducted open market purchases, sellers held on to the funds instead of depositing them in banks. These circumstances prevented the interest rate from falling. This scenario, called a(n) ________, occurred during the Great Recession and the best policy response is to ________.
- monetary stall; pursue a contractionary monetary policy
- liquidity trap; pursue an expansionary fiscal policy
- interest pitfall; pursue an expansionary fiscal policy
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