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How does a decrease in interest rates decrease investment rates? This is how I believe a liquidity trap works, not sure if it is correct.

Thank you

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  • $\begingroup$ What definition of “investment rate” are you using? Investment in economics refers to capital expenditure. Do you mean “interest rate” of “rate of return”? $\endgroup$
    – Brian Romanchuk
    Apr 13, 2020 at 17:56
  • $\begingroup$ Investment rate as private expenditure. $\endgroup$
    – user26090
    Apr 14, 2020 at 21:28
  • $\begingroup$ what do you mean by "Investment rate as private expenditure"? Amount of private investment of total private expenditure? Please clarify $\endgroup$
    – Brennan
    Apr 15, 2020 at 0:31
  • $\begingroup$ In that case, that’s not what a liquidity trap refers to. (Admittedly, a lot of people have mis-used the term, so there might be someone who says that.) The liquidity trap is a phenomenon in bond markets, where yields cannot get lower. $\endgroup$
    – Brian Romanchuk
    Apr 15, 2020 at 0:42
  • $\begingroup$ Total expenditure yes. $\endgroup$
    – user26090
    Apr 16, 2020 at 14:29

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