Which statement best describes the economic problem known as the liquidity trap, where money demand is perfectly
Question:
Which statement best describes the economic problem known as the liquidity trap, where money demand is perfectly elastic to the interest rate?
a. The interest rate reaches a upper bound, and liquidity preferences have fallen to such an extent that people are unwilling to sell interest bearing assets.
b. The interest rate reaches a lower bound, and liquidity preferences have fallen to such an extent that people are unwilling to sell interest bearing assets.
c. The interest rate reaches a upper bound, and liquidity preferences have risen to such an extent that people are unwilling to purchase interest bearing assets.
d. The interest rate reaches a upper bound, and liquidity preferences have fallen to such an extent that people are unwilling to purchase interest bearing assets.
e. The interest rate reaches a lower bound, and liquidity preferences have risen to such an extent that people are unwilling to purchase interest bearing assets.
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett