Liquidity trap

A liquidity trap is a situation in which people and businesses have so much money (liquidity) that they do not want to spend it. They would rather save it, because they think that prices might go down in the future or that they will get a better return if they save it. In a liquidity trap, people and businesses are not willing to spend their money, which means the economy can slow down because nothing is being bought and there is not enough money circulating.