Traditional Culture Encyclopedia - Traditional culture - Is the flexible preference trap the same as the liquidity preference trap?
Is the flexible preference trap the same as the liquidity preference trap?
Liquidity preference, also known as flexible preference, refers to a psychological motivation for people to be willing to keep a certain portion of their wealth in the form of money or in the form of deposits, rather than in the form of capital such as stocks and bonds. Liquidity trap is a hypothesis put forward by Keynes, refers to a certain period of time when the level of interest rates reduced to can not be lower, people will produce interest rates rise and bond prices fall expectations, the elasticity of demand for money will become infinite, that is, no matter how much increase in the amount of money, will be stored by the people. When a liquidity trap occurs, the looser monetary policy can not change the market interest rate, making monetary policy ineffective
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