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'Liquidity trap' is a situation in which options 1.people want to hold only cash because prices are falling everyday. 2.people want to hold only cash because there is too much of liquidity in the economy. 3.the rate of interest is so low that no one wants to hold interest bearing assets and people want to hold cash. 4.there is an excess of foreign exchange reserves in the economy leading to excess of money supply.

'Liquidity trap' is a situation in which
options
1.people want to hold only cash because prices are falling everyday.
2.people want to hold only cash because there is too much of liquidity in the economy.
3.the rate of interest is so low that no one wants to hold interest bearing assets and people want to hold cash.
4.there is an excess of foreign exchange reserves in the economy leading to excess of money supply.
 

Grade:12th pass

1 Answers

Vikas TU
14149 Points
4 years ago
Hiii Arun 
In liquidity trap there is too much liquidity in the economy , people does not want to invest their money in the market. They believe that bond price are very high and interest rate are too low, so, they want to hold only money, 
So, option B would be correct ans.
 

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