The term monetary impotence refers to the
A)failure of firms to lower prices even when wages are falling.
B)problems that an economy faces when industries are not perfectly competitive and prices do not fluctuate.
C)failure of fiscal policy to drive down prices in a depression.
D)inability of an increase in real balances to raise the level of output.

Question

Quizplus · Accepted Answer

Monetary impotence refers to the situation where an increase in real money balances (i.e., the real value of the money supply) does not lead to an increase in output or economic activity. This can occur in certain economic conditions, such as a liquidity trap, where interest rates are so low that monetary policy becomes ineffective in stimulating the economy.

The Term Monetary Impotence Refers to the