In a severe recession, the Fed's implementation of an easy money policy may have little to no impact on lending, borrowing, investment or aggregate demand. This describes the:
A) inflexibility of monetary policy tools.
B) lags that hinder monetary policy.
C) liquidity trap.
D) monetary political business cycle.

Question

Quizplus · Accepted Answer

A liquidity trap occurs when interest rates are low and savings rates are high, rendering monetary policy ineffective in stimulating borrowing and investment.

In a Severe Recession, the Fed's Implementation of an Easy