Benchmarks
Nifty25,356.50-32.41
FEATURED FUNDS
★★★★★
Canara Robeco Infrastructure Direct-Growth
5Y Return
32.92 %
Invest Now
FEATURED FUNDS
★★★★★
Canara Robeco Flexi Cap Fund Direct-Growth
5Y Return
23.27 %
Invest Now
Business News›Definitions›Economy›Liquidity Trap
Categories
- Glossary
- Economy
- Insurance
- Equity
- Transportation
- sports
- Space Technology
- Entertainment
- Astronomy
- Analytics
- Commodity
- Education
- Finance
- Human-Resource
- Mutual Fund
- Mathematics
- Real-Estate
- Marketing
- Security
- Shipping
- Retail
- HR
- Software-Development
- Testing
- Budget
Suggest a new Definition
Proposed definitions will be considered for inclusion in the Economictimes.com
Economy
- PREV DEFINITION
Liquidity
Liquidity means how quickly you can get your hands on your cash.
Read More
- NEXT DEFINITION
Logistics
Read More
Definition: Liquidity trap is a situation when expansionary monetary policy (increase in money supply) does not increase the interest rate, income and hence does not stimulate economic growth.
Description: Liquidity trap is the extreme effect of monetary policy. It is a situation in which the general public is prepared to hold on to whatever amount of money is supplied, at a given rate of interest. They do so because of the fear of adverse events like deflation, war.
In that case, a monetary policy carried out through open market operations has no effect on either the interest rate, or the level of income. In a liquidity trap, the monetary policy is powerless to affect the interest rate.
There is a liquidity trap at short term zero percent interest rate. When interest rate is zero, public would not want to hold any bond, since money, which also pays zero percent interest, has the advantage of being usable in transactions.
Hence, if the interest is zero, an increase in quantity of money cannot not induce anyone to buy bonds and thereby reduce the interest on bonds below zero.
Read More News on
- MONETARY POLICYLIQUIDITY TRAPINTEREST RATEOPEN MARKET OPERATIONS
- PREV DEFINITION
Liquidity
Liquidity means how quickly you can get your hands on your cash.
Read More
- NEXT DEFINITION
Logistics
Read More
Related Definitions
- Asset Turnover RatioAsset turnover ratio is the ratio between the value of a company’s sales or revenues and the value of its assets. It is an indicator of the efficiency with which a company is deploying its assets to produce the revenue. Thus, asset turnover ratio can be a determinant of a company’s performance. The higher the ratio, the better is the company’s performance. Asset turnover ratio can be different froAusterity economic growth of country is determined by factors such as Capital structure, Human resources, Natural resources and revenue generation of businesses operating within the nation. A decline in the economic development can impact all the four factors of a government system. One of the main contributors of decline in the economic system is debts. A country borrows money from creditors, with the vieBailoutBailout is a general term for extending financial support to a company or a country facing a potential bankruptcy threat. It can take the form of loans, cash, bonds, or stock purchases. A bailout may or may not require reimbursem*nt and is often accompanied by greater government oversee and regulations.The reason for bailout is to support an industry that may be affecting millions of people inBalance Of PaymentAccording to the RBI, balance of payment is a statistical statement that shows1. The transaction in goods, services and income between an economy and the rest of the world,2. Changes of ownership and other changes in that economy’s monetary gold, special drawing rights (SDRs), and financial claims on and liabilities to the rest of the world, and3. Unrequited transfers.Description: The tran
- Bank RateBank rate is the rate charged by the central bank for lending funds to commercial banks. Description: Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa.Also See: Base Rate, Call Money RateBarter the hard currency came into existence, the most common form of trade was bartering. Barter Systemdates back to the old time when there was no money. The only way to buy goods was to exchange them with personal belongings of similar value. For example- A farmer gives his cattle in exchange for some land, and so on. In simple words, any exchange of goods and services for other goods and services wiBase RateBase rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Description: Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium.AlsBasel IiiThe third Basel accord or Basel-III is the cornerstone of banking supervision in the world. Framed by a committee of elite central bankers, the accord provides the guidelines for prudent supervision of banks all over the world and sets the standard for such supervision.Description: Basel-III is third in the series of accords following Basel-I and Basel-II. It was released in December, 2010, in
- BrexitIt is an abbreviation for the term “British exit”, similar to “Grexit” that was used for many years to refer to the possibility of Greece leaving the Eurozone. Brexit refers to the possibility of Britain withdrawing from the European Union (EU). The country will hold a referendum on its EU membership on June 23.Description: Why the Call for Referendum?When David Cameron became the prime miBrics the BRICS?BRICS is an acronym that started as BRIC in 2001, coined by Jim O’Neill (a Goldman Sachs economist) for Brazil, China, India, and Russia. Later in 2010, South Africa was added to become BRICS. Goldman Sachs claimed that the global economy will be dominated by the four BRIC economies by 2050. The main reason for such a claim was that China, India, Brazil, Russia, and South Africa were ra
Related News
View: If a stimulus is to fight FY21’s deep recession, India is already very lateCovid-19 is an economic shock with huge negative effects. If the shock is allowed to play out without an effective external intervention, it is more than likely there will be damage — lost jobs, gutted businesses, low middle-income families descending to poverty, consumer spending caution — that will persist long after, say, immunisation begins.- Learn with ETMarkets: What is negative interest rateThe negative interest rate policy adopted by Japan and some European countries in the last decades has failed, too.
- Do you notice, the e-commerce industry has stopped making big news of late? Turns out the industry sustained itself largely on the strength of doleouts.
- In Japan, an entire lost decade has been caught in the liquidity trap: Mythili BhusnurmathMythili Bhusnurmath, Consulting Editor, ET NOW, explains why she is not enthusiastic about the latest move by BoJ to shore up people's spending power
- Happy holidays! Discover photography and become a proNow we have started to look beyond snapshots; at the quality of light; its moods during the different times of the day; the angle at which it hit the subject, the play of shadows.
- Rail Budget 2014: Nizamuddin station can't cope with rushThe railway minister's promises of bullet trains and branded food brought no cheer to passengers stuck at Nizamuddin station on Tuesday.
- ET Review: Karbonn Titanium Octane PlusKarbonn's new flagship combines top-of-the-line specifications with latest Android 4.4. It has an octacore processor, 2GB RAM and 16GB internal storage.
- Andhra Pradesh gas tragedy: GAIL appoints Engineers India Limited to check pipeline networkIn the wake of Nagaram gas pipeline fire-explosion, GAIL has appointed EIL to check the health of its pipeline network of 870 kms from KG Basin.
- Delhi Development Authority plan in the offing to build 4,500 flats for the elderlyThe proposal will be tabled in the authority's upcoming board meeting and will hopefully be cleared by the Delhi LG, who is also DDA chairperson.
- Hot Rod: Young James Rodriguez has licence to thrillJames Rodriguez created 43 chances, more than any other player in the tough South American group in which Colombia finished second.
Load More
Trending DefinitionsRailways Budget 2024Interim Budget 2024Budget 2024 New Tax RegimeIncome Tax in Budget 2024Debt fundsSensexNiftyRepo rateMutual fundGross domestic productData miningAdvertisingProductMonopolyCryptographyDepreciation
