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receive, which reduces the quantity demanded and supplied below the free-market equilibrium, creating a deadweight loss. The size of the loss depends on the elasticity of demand and supply. If demand is relatively inelastic, the loss will be larger than if demand were relatively elastic....
The rate of interest has fallen enough. ... It cannot fall further. The horizontal portion of the liquidity preference curve is referred to as the liquidity trap. In this portion of the curve, the demand formoney is infinitely elastic with respect to the interest rate. What is liquidity the...