Economics
The Liquidity Trap and Monetary Policy Limits
Quick fact
In a liquidity trap, the opportunity cost of holding cash is almost zero because interest rates are at or near zero, so people choose to keep money rather than invest it.
Why this is interesting
Imagine you are holding a cup of water, and someone pours more water into it—but the cup never overflows. In a liquidity trap, central banks can print money endlessly, yet the economy refuses to wake up.