Question : _____ is a situation of a low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss.
Option 1: Liquidity trap
Option 2: Revenue deficit
Option 3: Parametric shift
Option 4: Paradox shift
Correct Answer: Liquidity trap
Solution : The correct answer is the Liquidity trap .
A liquidity trap occurs when interest rates are low, and people would rather keep their money in cash or cash equivalents since they don't know how the country's economy will perform.
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