When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:
A) for the Fed to print money
B) for the Fed to buy financial securities
C) to use fiscal stimulus
D) All of these answers are correct.
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

When an economy is in a deflationary spiral and nominal interest rates are close to zero, monetary policy tools such as printing money or buying financial securities by the central bank may not be effective. In such a situation, fiscal stimulus by the government may be necessary to boost demand and spark economic growth. Therefore, all the given options are correct to combat deflationary spirals.

When an Economy Is in a Deflationary Spiral, and Nominal