In a "liquidity trap,"
A)the demand for money is infinite.
B)the LM curve is a vertical line.
C)the nominal interest rate on short-term assets is relatively high.
D)money supply changes have a strong impact on interest rates.

Question

Quizplus · Accepted Answer

In a liquidity trap, the demand for money becomes infinite or extremely high at a very low or zero interest rate, meaning people prefer to hold cash because they expect no better return from bonds or other investments.

In a "Liquidity Trap