Explanation:

• Option A (Correct): A liquidity trap occurs when the demand for money becomes infinitely elastic, rendering additional monetary injections ineffective in lowering interest rates or stimulating real economic activity. In such scenarios, monetary policy loses its potency.

• Option B (Incorrect): The crowding-out effect refers to the reduction in private sector investment caused by increased government borrowing. This phenomenon pertains to fiscal policy, not monetary policy.

• Option C (Incorrect): A time lag in implementing government spending is a challenge associated with fiscal policy, not monetary policy. For instance, delays in executing capital projects to boost employment and income illustrate this limitation.