To Avoid Falling into a Liquidity Trap, Most Central Banks

question 47

Multiple Choice

To avoid falling into a liquidity trap, most central banks:

• A) seek a positive but small inflation rate rather than zero inflation.
• B) target inflation rather than the money supply.
• C) conduct open-market operations to change the money supply instead of changing the discount rate.
• D) aim at a target of zero inflation so that inflation expectations are zero too.

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