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According to the Keynesians, the demand for money depends on income and interest rate. The liquidity trap occurs because the interest rate is so

 

According to the Keynesians, the demand for money depends on income and interest rate. The liquidity trap occurs because the interest rate is so very low and everyone expects it to rise. Please draw and explain whether the fiscal policy is effective or not when there is liquidity trap.

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During a liquidity trap the interest rate is extremely low and individuals and businesses prefer to hold money rather than invest or spend it In this ... blur-text-image

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