Assertion (A) : In liquidity trap, the demand for money is perfectly interest elastic. Reason (R) : Because in this situation, all the investors expect the market rate of interest to rise towards the natural rate of interest. Codes :

Related MCQs

• Assertion (A): According to Keynes, individuals hold either cash or all bonds. Reasoning (R): Because, according to him, the speculative demand for money is associated with uncertainty. Codes:
• In the Keynesian system speculative demand for money arises because of, 1 : uncertainty of future interest rate. 2 : unexpected expenditures. 3 : To bridge the gap between income and eventual expenditures. 4 : Relationship between changes in the interest rates and bond price. Codes :
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• Liquidity trap is a situation when,
• Assertion (A) : There exits inverse relationship between interest rates and bond prices. Reason (R) : A bond price represents the present discounted value of the payments agreed upon at the time when the bond was issued. Codes :
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• Assertion (A): Long-run Philips curve is a vertical line at the NAIRU Reason (R): Non-accelerating inflation raise of unemployment, more or less, stands accepted