liquidity trap

liquidity trap definition - business

liquidity trap

An economic condition in which interest rate reductions by monetary authorities are ineffective in stimulating economic activity. In this circumstance, individuals, financial institutions, and other businesses become so risk averse they choose to increase liquidity rather than spend and invest.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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