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English definition of “liquidity trap”

liquidity trap

noun [S]
 
 
ECONOMICS
a situation in which a government is not able to encourage economic activity, for example by cutting interest rates, because people who have money do not want to spend it: This carries the danger of the 'liquidity trap', where real interest rates cannot be cut sufficiently to stimulate growth because prices are falling even faster.
(Definition of liquidity trap from the Cambridge Business English Dictionary © Cambridge University Press)
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