Explain the phenomenon of liquidity trap

      

Explain the phenomenon of liquidity trap.

  

Answers


william
The liquidity trap is the situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective. In a liquidity trap, consumers choose to avoid bonds and keep their funds in savings, because of the prevailing belief that interest rates will soon rise.
steve williams answered the question on January 23, 2018 at 11:24


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