While Keynes thought that a liquidity trap was a genuine possibility, when he wr

Question

While Keynes thought that a liquidity trap was a genuine possibility, when he wrote the General Theory he thought more could be done and should be done to _____.

a. lower short-term interest rates

b. lower long-term interest rates

c. raise short-term interest rates

d. raise long-term interest rates

5. Henry Simons, the famous Chicago economist who influenced Milton Friedman, argued that in order to prevent banking panics we should a. require banks to hold reserves equal to their deposits 2 break up large banks C. increase deposit insurance by the Federal government to 100% d. remove existing bank regulations, and allow free entry into banking

Explanation / Answer

Answer to the statement is that according to Keynes more could be done and should be done to lower short-term interest rates. So, statement a is correct.

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