Difference between revisions of "Liquidity trap"
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(New page: The liquidity trap is an economic theory that there is low interest rate at which increasing the money supply further will not lower the interest rate further. This occurs, according to t...) |
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| − | The liquidity trap is an economic theory that there is low interest rate at which increasing the money supply further will not lower the interest rate further. This occurs, according to the theory, because there is infinite demand for money at the low interest rate and everyone would rather hold money in idle balances rather than move into positions holding long-term securities at very low yields. | + | The '''liquidity trap''' is an economic theory that there is low interest rate at which increasing the money supply further will not lower the interest rate further. This occurs, according to the theory, because there is infinite demand for money at the low interest rate and everyone would rather hold money in idle balances rather than move into positions holding long-term securities at very low yields. |
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Revision as of 20:09, July 22, 2007
The liquidity trap is an economic theory that there is low interest rate at which increasing the money supply further will not lower the interest rate further. This occurs, according to the theory, because there is infinite demand for money at the low interest rate and everyone would rather hold money in idle balances rather than move into positions holding long-term securities at very low yields.