_____ is a situation of very low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss.

Options

A. Paradox of thrift
B. Parametric shift
C. Revenue deficit
D. Liquidity trap

Answer

D

Explanation

Liquidity Trap is a situation of very low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss. Liquidity Trap is a contradictory economic situation in which interest rates are very low and saving rates are high, Rendering economic policy ineffective.