CBSE Class 12-commerce Answered
What is meant by liquidity trap?
Asked by Topperlearning User | 18 Apr, 2016, 09:06: AM
Expert Answer
The speculative demand for money becomes infinitely large or elastic when the rate of interest goes below a critical minimum level i.e. a level below which people prefers to hold idle cash balance. It is the unlimited preference for the idle cash balance when the rate of interest falls much below the normal level. This situation is called liquidity trap.
Answered by | 18 Apr, 2016, 11:06: AM
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