When the general interest rate reaches a very low level, which of the following statements will be correct?
A.Most people will prefer to hold bonds.
B.Any increase in the money supply will cause the interest rate to fall further.
C.Most people will expect the interest rate to rise in the future.✓ Correct
D.Most people will speculate a further decline in the rate of interest.
Explanation
When interest rates are at a very low level, most people expect them to rise in the future (liquidity trap concept), so they prefer holding cash rather than bonds, anticipating that bond prices will fall.
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