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Money and interest rates

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Question 10

Which of these describes a liquidity trap?

A situation where expansionary monetary policy becomes ineffective because nominal interest rates are near zero and consumers/businesses prefer to hoard cash rather than spend or invest.

A fall in private sector investment caused by an increase in government borrowing and spending.

The automatic fluctuation of tax revenues and government spending over the course of the economic cycle.

A period of high inflation combined with stagnant economic growth and rising unemployment.

Money and interest rates Questions

  1. A Level
  2. /Economics
  3. /Money and interest rates