The Liquidity Trap condition occurs at a_______________?
Correct answer: B. Very low rate of interest
- A. Low rate of interest
- B. Very low rate of interest
- C. High rate of interest
- D. Very high rate of interest
Explanation
A liquidity trap occurs when interest rates are already very low, so people prefer holding cash and further increases in money supply do not significantly reduce rates or stimulate spending.
Last updated
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,462 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
One percentage decrease in unemployment is associated with two percentage points of additional growth in real gdp is called?
Which of the following is a normative statement in economics ?
Macroeconomics deals with?
The study of inflation is part of ?
The total demand for goods and services in an economy is known as_____________?