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Question:

A situation in which injections of money into the economy fail to reduce interest rates or influence real economy activity is known as:

A Liquidity trap.
Explaination

• Money neutrality states that money supply and/or the money growth rate will not affect the real interest rate, but will influence inflationary expectations.
• Quantitative easing is basically an expansionary open market operation conducted on a much larger scale in the hope of stimulating the economy.
• A liquidity trap is a situation where an interest rate cut (to counter deflation in the economy) fails to lower savings and stimulate consumption.