Question

Given below are two statements:
Statement I: When the economy is in liquidity trap, the LM curve is vertical.
Statement II: Monetary policy is ineffective when the economy is in liquidity trap.
In the light of the above statements, choose the correct answer from the options given below:

• A. Both Statement I and Statement II are true
• B. Both Statement I and Statement II are false
• C. Statement I is true but Statement II is false
• D. Statement I is false but Statement II is true

Answer 1

The Correct Option is D

The correct option is(D): Statement I is false but Statement II is true