In times of economic contraction, a nation is often led out of trouble by:
Big banks willing to take measured risk
Small business and individuals assuming new risks
Government easing taxes
Government lowering interest rates
I'm sure this is making every OWS supporter smile to see this being said but well their ideals are on point its just their way of doing things that I don't agree with.
We need to get away with looking to china and india for labor at $20 a day and bring it back to america and pay our people instead. An option you should have put on there was something along the line of "Stop outsourcing to foreign countries by major corporations" I'm pretty sure that would get the most votes hands down.
The decline in interest rates and the rise in savings are accompanied by an increased desire among businesses and households to safeguard more of their wealth in cash. As a result, the speed with which cash turns over in the economy, the velocity of money, falls. And as the velocity of money falls, total spending falls, workers are fired, and their savings evaporate with their incomes...
When rates become so low that there’s little difference between cash and short-term government bonds, open-market operations cease having an effect; they simply swap one zero- yielding government asset for another, with their hunger to hold more safe, liquid assets unsatisfied.
This is the liquidity trap.
In this situation we need deficit spending. The government spends and borrows, creating more of the safe, cashlike assets that private investors want. As these bonds hit the market, people who otherwise would have socked their money away in cash -- diminishing monetary velocity and slowing spending -- buy bonds instead. A large, timely government deficit thus short- circuits the adjustment mechanism, avoiding the collapse in monetary velocity.
There is a strong case for deleveraging from all the debt that has piled up ove 30 years too.
Economics is more of an art, I guess.
Kucheka's paragraphs are correct.
Choice B is directly related to choices A, C, and D. They are inseparable.