The liquidity trap is a situation where: MCQ with Answer and Explanation

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The liquidity trap is a situation where:

A. investment is very high

B. interest rates are very high

C. interest rates are very low and speculative money demand becomes perfectly elastic

D. money supply is zero

Answer: Option C

Solution (By JKSSB Mock Tests)

In a liquidity trap, interest rates are so low that people hold any amount of money, making speculative money demand perfectly elastic.

This question belongs to: Economy GK Economy Set 1

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Correct Answer: Option D

Explanation:
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Correct Answer: Option B

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The WPI is compiled by the Office of Economic Adviser in the Ministry of Commerce and Industry.

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