The Keynesian Liquidity Trap Fable

01/07/2024 Frank Shostak

A central doctrine of the Keynesian system is the “liquidity trap” in which consumers hold money in anticipation of higher interest rates. The act of holding money allegedly promotes “underconsumption,” continuing the economic downturn. This doctrine, however, cannot withstand scrutiny.

Original article: The Keynesian Liquidity Trap Fable

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