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LIQUIDITY TRAP Definition & Legal Meaning

Definition & Citations:

Downward-spiraling regression situation with dim, unclear profit prospects keeping entities from taking loans to upgrade internal infrastructure or launch new business. This makes banks cash-rich due to few borrowers, so banks do not earn on interest paid. Investors hold their cash as yields and gains seem diminished. This becomes a self-fulfilling prophecy as no money is moving anywhere where no how.


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