Q. 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 risetowards the natural rate of interest. Codes : (Solved)
1. (a) & (r) both are correct and (r) is the correct explanation of (a)
2. (a) & (r) both are correct, but (r) is not the correct explanation of (a)
3. (a) is correct, but (r) is incorrect.
4. both (a) and (r) are incorrect.
- a. (a) & (r) both are correct and (r) is the correct explanation of (a)