In a liquidity trap,monetary policy has ________ effect on aggregate spending because a change in the money supply has ________ effect on interest rates.
A)no;no
B)no;a large
C)no;a small
D)a large;a large

Question

Quizplus · Accepted Answer

In a liquidity trap, interest rates are already at or near zero, which means that monetary policy cannot stimulate spending by further reducing interest rates. Therefore, a change in the money supply does not have any effect on interest rates or aggregate spending.

In a Liquidity Trap,monetary Policy Has ________ Effect on Aggregate