A Traditional Liquidity Trap Is Problematic for a New Keynesian

Multiple Choice

A traditional liquidity trap is problematic for a New Keynesian policy maker because there is a

A) strong incentive to create inflation in the long run.
B) positive output gap but the interest rate cannot go below zero.
C) strong incentive to create deflation in the long run.
D) negative output gap but the interest rate cannot go below zero.
E) negative output gap but the interest rate target remains too low.