Paul Krugman is probably the loudest econo-pundit who frequently talks about liquidity traps, and has his own definition. The NY Fed has a short paper on liquidity traps as well. There are many theories about whether or not liquidity traps exist, and if they do, how do we get rid of them? There are other econo-bloggers who have their own ideas about how to escape from a liquidity trap.
Questions you might try to answer:
- Krugman’s most important point gets to the issue of quantitative easing, as well as qualitative easing. What role do these types of unconventional monetary policy play today in our economy. How have they operated? Has quantitiative/qualitative easing helped the economy? Who has been the beneficiary of this unconventional policy?
- Report on some evidence supporting the existence of liquidity traps, or lack thereof. If you believe that they have existed in the past, what are the most effective ways of dealing with these traps?
I would like your statements to be as subjective as possible, or in jargon terms, positive and not normative in nature. Also, remember, I want you to keep your descriptions short, basic, and related to classroom content. Read other students comments before posting, and please leave your name with your posting.