What could monetary policymakers do to avoid liquidity traps in the future?
A) Change back to a commodity money system rather than a fiat money system.
B) Maintain a higher inflation target.
C) Expand the money supply more rapidly when expansion is needed.
D) Increase the natural rate of unemployment.

Question

Quizplus · Accepted Answer

Maintaining a higher inflation target can help avoid liquidity traps by ensuring that nominal interest rates remain above zero, providing more room for monetary policy to stimulate the economy during downturns.

What Could Monetary Policymakers Do to Avoid Liquidity Traps in the Future