Expansionary monetary policy

Question

The modern consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

A) is ineffective because the public expects it.

B) is harmful because it only increases the aggregate price level.

C) has little impact on aggregate demand due to the existence of liquidity traps.

D) can be used to increase aggregate demand but at the cost of higher aggregate prices.

Answer 1

C) has little impact on aggregate demand due to the existence of liquidity traps.