Liquidity Trap - Overview, Graphical Representation, What …
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WebDec 5, 2023 · A liquidity trap is an economic scenario where savings rates are high, and interest rates are extremely low, making monetary policy ineffective. As economist John Maynard Keynes explained, people shun bonds and opt to keep their money in cash savings because they think interest rates will increase shortly (which would push bond prices down).
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