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qid 6969 · economics
Question: Which of the following could limit the ability of a central bank to conduct expansionary monetary policy?
- Investment demand is nearly perfectly elastic.
- Households carry very little cash holding their money in checking and saving deposits.
- Banks make loans with all excess reserves.
- Households carry a significant amount of cash, holding very little in checking and saving deposits.
- Money demand is nearly perfectly elastic.
Our answer: E. Money demand is nearly perfectly elastic. Source quote machine-checked (exact quote)
How it was answered
Multi-step solver (maze), replayed by code
Current source
Wikipedia, "Liquidity trap"
https://en.wikipedia.org/wiki/Liquidity_trap
“the demand for money may be infinitely elastic with respect to variations in the interest rate”
Source quote machine-checked (exact quote)
Earlier version (superseded)
https://en.wikipedia.org/wiki/Liquidity_trap
Source weak (http_get_200_text_and_question_terms)
Earlier version (superseded)
No public source has been found for this card yet (3 places checked internally).
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