# Liquidity trap and consumers' reaction to an increase in money supply

I've understood that when the nominal interest rate reaches the zero lower bound there is nothing that the monetary policy can do to increase the output level of a certain economy. Because $i=0$, no one is interested in bonds anymore, and people decide to hold more money in correspondence to the same interest rate. But if they hold more money, why they decide to keep them, instead of increasing their level of consumption and thus increase also the level of production?

It may be a stupid question, but I really cannot figure out the answer. Hope you can help me. Thank you in advance.

It also depends on whether the increase in the money supply is temporary or permanent. A permanent increase in the money supply will permanently increase the price level, thereby inducing a one-period spike in inflation and a contraction in real interest rates ($i^R=i^N-\pi$). The quantity of loanable funds demanded will increase. If the increase in the money supply is temporary, though, this will not work. This is why economists view the implications of permanent versus temporary changes to the money supply very differently during zero bound episodes.