In the 1990s and early 2000s, Japan's central bank reduced real interest rates to zero percent, but investment spending did not respond enough to bring the economy out of recession. Japan's experience is an illustration of

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Japan's experience is an example of a liquidity trap, where monetary policy becomes ineffective as interest rates are already so low that further reductions do not stimulate investment and economic growth. This is often referred to as pushing on a string because central banks can no longer influence the economy by adjusting interest rates.

In the 1990s and Early 2000s, Japan's Central Bank Reduced