Question
The country Murell is in the midst of a recession. Firms have cut back on investment and consumer spending has fallen. Larry Summers, a market
The country Murell is in the midst of a recession. Firms have cut back on investment and consumer spending has fallen. Larry Summers, a market analyst, is discussing the economy's grim prospects with his journalist friend Michael Philips. Larry says that the recent open market purchases by the central bank will have a positive impact on consumer demand. Michael does not agree. He thinks that monetary policy will not be very effective and that policy makers should instead focus on fiscal policy measures to boost the economy.
Which of the following, if true, would strengthen Michael's argument?
A.The value of the main stock market index in Murell has fallen sharply.
B.Credit ratings of the country were recently lowered due to very high fiscal deficit.
C.The interest rate has been reduced periodically over the last few months and is now close to zero.
D.Following the crisis, the country has imposed restrictions on inflows of foreign portfolio investments.
E.The demand for assets like government treasury bills has increased in the past few months
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