The _____________________________ occurs when interest rates are abnormally low and virtually everyone believes they will be going up in the future.

Question

Quizplus · Accepted Answer

The liquidity trap is a situation where interest rates are so low that people prefer to hold onto cash instead of investing it, as they believe that interest rates will rise in the future. This causes a decrease in the money supply as people hold onto their cash, which can be detrimental to the economy.

The _____________________________ Occurs When Interest Rates Are Abnormally Low and Virtually