Which of the following conditions will most likely coincide with the existence of a liquidity trap?
A)inflation is rising
B)inflation is constant
C)inflation is zero
D)individuals prefer to hold only money and not bonds
E) the real interest rate is negative

Question

Quizplus · Accepted Answer

A liquidity trap occurs when individuals prefer to hold cash rather than invest in bonds or other securities, often due to expectations of adverse events such as deflation or insufficient returns on investments.

Which of the Following Conditions Will Most Likely Coincide with the Existence