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:

Updated On: Mar 12, 2024
  • Both Statement I and Statement II are true
  • Both Statement I and Statement II are false
  • Statement I is true but Statement II is false
  • Statement I is false but Statement II is true
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The Correct Option is D

Solution and Explanation

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