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29 August, 07:28

Suppose the economy is in a liquidity trap. True or false. A monetary contraction will not have any effect on the nominal interest rate, though a monetary expansion may have an effect on the nominal interest rate.

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  1. 29 August, 07:30
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    False

    Explanation:

    When a country is in a liquidity trap, monetary policy both contractionary and expansionary would have an effect on interest rate
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