The liquidity trap
अब Quizwiz के साथ अपने होमवर्क और परीक्षाओं को एस करें!
What is a liquidity trap?
A situation in which monetary policy becomes ineffective because borrowing & lending cease to respond to interest rates
What does the liquidity trap diagram show
When the interest rate is zero and when people have enough money they do not switch between money and bonds When the interest rate is zero further increases in the money supply have no effect on interest rate
