Push On A String

AAA

DEFINITION of 'Push On A String'

When monetary policy cannot entice consumers into spending more money or investing in an economy, even if monetary policy is loosened to to put more money into peoples' hands. This term is often attributed to noted economist John Maynard Keyenes.

INVESTOPEDIA EXPLAINS 'Push On A String'

If the core demand doesn't exist to induce people to part with their money, it can't be forced through monetary policy. Trying to do so is like trying to "push on a string".

Such a situation occurred during the Great Depression in the 1930s and in Japan during the late 1990s when interest rates were about 1%. This situation is sometimes referred to as a "liquidity trap" and explains why central bankers do not attempt to lower rates to levels approaching zero. To lower rates to this level would eliminate monetary policy's power to influence economic growth and consumption.

RELATED TERMS
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  2. Money Supply

    The entire stock of currency and other liquid instruments in ...
  3. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) ...
  5. Liquidity Trap

    A situation in which prevailing interest rates are low and savings ...
  6. Accommodative Monetary Policy

    When a central bank (such as the Federal Reserve) attempts to ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  3. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  4. Active Trading

    Introduction To Stationary And Non-Stationary Processes

    What to know about stationary and non-stationary processes before you try to model or forecast.
  5. Economics

    What's The Impact On Equities If The Rates Hike?

    The Fed is on course for raising interest rates. True, that leaves the question of when (most likely June or September, but could be later) and how much.
  6. Bonds & Fixed Income

    Why Didn't Quantitative Easing Lead To Hyperinflation?

    Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy.
  7. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  8. Investing

    Are You Ready To Invest In The Tech Sector?

    Tech stocks, particularly those of mature tech companies, are well positioned and offer meaningful upside potential in the near-term.
  9. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  10. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center