The situation ‘Liquidity trap’ refers to:

A Because of price rate declination people wish to hold only cash

B People want to hold only cash because there is too much of liquidity in the economy

C The rate of interest is so low that no one wants to hold interest bearing assets and people wants to hold cash

D There is an excess of foreign exchange reserves in the economy leading to excess of money supply

Answer & Explanation
Option: [C]

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