Liquidity Trap |
| In economics, a liquidity trap is a situation when the economy is stagnant and the interest rate is close to 0 percent. At such times, people tend to keep their money in their bank accounts instead of investing it, aggravating the recession. Normally the monetary authorities could stimulate the economy by lowering interest rates but as it is already so low, it cannot be decreased any further and the economy is caught in this trap. |
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