What is meant by "monetary accommodation"?

"Monetary accommodation" refers specifically to measures implemented by central banks or monetary authorities to encourage liquidity in the financial system. This typically involves lowering interest rates or purchasing government securities, which injects more money into the economy and lowers the cost of borrowing. When liquidity is increased, it becomes easier for businesses and consumers to access credit, thus spurring economic activity.

This approach is often used in response to economic downturns or to promote financial stability by ensuring that there is enough money circulating in the economy. By focusing on facilitating easier access to funds, monetary accommodation aims to support both investment and consumption, ultimately fostering economic growth.

In contrast, increasing taxes is a fiscal policy measure aimed at controlling government revenue, not necessarily enhancing liquidity. Trade barriers, which may involve tariffs or quotas, are unrelated to monetary policy and instead affect international trade dynamics. Government intervention to control inflation typically involves tightening monetary policy rather than facilitating liquidity, as it seeks to reduce the money supply to stabilize prices. Therefore, the focus on measures taken to promote liquidity is what makes the correct answer applicable in this context.