Source: Ludwig von Mises Institute
by William L Anderson
“Keynesians hold that the economy is directed by ‘aggregate demand,’ that is overall spending, and that if consumers slow their spending, then the central bank can respond by lowering interest rates, which would encourage businesses to borrow money for expansion purposes, thus redirecting some of the lost consumer spending. However, according to Keynesians, if interest rates already are near-zero, then lowering rates is self-defeating and can lead to a ‘Liquidity Trap.’ … Mainstream economists speak of so-called automatic stabilizers in which government policies act in a counter-cyclical way to reverse harmful economic trends.” (08/27/26)