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.

---

Definitions:

Structuralism

An approach in psychology that emphasizes analyzing components of the mind's structure through introspection and understanding how these components fit together.

Functionalism

A perspective in sociology and psychology that views society as a complex system whose parts work together to promote solidarity and stability.

Schools of Thought

Diverse theories or philosophies within a domain or discipline that propose distinct principles and methodologies.

Ethical Issues

Moral challenges that arise in the context of professional practice or social interactions.