The 'liquidity trap' causes which policy to become ineffective? MCQ with Answer and Explanation

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The 'liquidity trap' causes which policy to become ineffective?

A. expansionary monetary policy

B. trade policy

C. fiscal policy

D. exchange rate policy

Answer: Option A

Solution (By JKSSB Mock Tests)

In a liquidity trap, interest rates are near zero and monetary expansion does not lower rates further, making monetary policy ineffective.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'Union Territory Goods and Services Tax Act' was passed in which year?

A. 2016

B. 2017

C. 2015

D. 2018

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Correct Answer: Option B

Explanation:
UTGST Act was passed in 2017.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'shadow economy' refers to:

A. stock market

B. banking sector

C. unreported economic activities outside the formal sector

D. formal sector activities

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Correct Answer: Option C

Explanation:
The shadow economy consists of unreported economic activities.

This question belongs to: Economy GK Economy Set 1

Question #3

The concept of 'Social Marginal Cost' is relevant for:

A. Correcting externalities and optimal provision of public goods

B. Only calculating private profits

C. Only determining market prices

D. Private decision making only

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Correct Answer: Option A

Explanation:
Social marginal cost includes both private costs and external costs. It is used in the analysis of externalities and in determining the socially optimal level of output.

This question belongs to: Economy GK Economy Set 1

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