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26 February, 13:56

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. 26 February, 15:13
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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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