When the general market interest rate reaches an exceptionally low level (often leading to a liquidity trap), which of the following statements is correct?

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Economics · Macroeconomics

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Most people will expect the interest rate to rise in the future.

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Answer 1

Any increase in the money supply will cause the interest rate to fall significantly further.

Answer 2

Most people will speculate a further sharp decline in the rate of interest.

Answer 3

Most people will prefer to hold bonds over cash.

Answer 4

Most people will expect the interest rate to rise in the future.

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