The situation where people are willing to hold any amount of money at a very low interest rate is called?
The situation where people are willing to hold any amount of money at a very low interest rate is called?
Solution
✅ Correct Option: 3
At a very low rate of interest, bond prices are at a maximum and everyone expects them to fall, so people prefer to hold all wealth as money. Speculative demand for money becomes infinitely elastic. This situation is called the liquidity trap.
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