The liquidity trap is the
A) vertical portion of the demand curve for money.
B) horizontal portion of the demand curve for money.
C) vertical portion of the supply curve of money.
D) horizontal portion of the supply curve of money.
E) vertical portion of the demand curve for investment.

Question

Quizplus · Accepted Answer

The liquidity trap is the horizontal portion of the demand curve for money, indicating that at very low levels of interest rates, people would be willing to hold any amount of money they have rather than investing it because the return on investment would be lower than the potential cost of holding cash.

The Liquidity Trap Is the