Difference between revisions of "Liquidity trap"
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| − | The '''liquidity trap''' is an [[Economics|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 [[Economics|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. |
[[Category: Economics]] | [[Category: Economics]] | ||
Revision as of 05:11, December 5, 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.