What are the implications of a liquidity trap for the Federal Reserve?

What will be an ideal response?

The Fed can add liquidity to the bank system by increasing its excess reserves, but that does not mean that banks will want to lend money. If banks do not lend, then there will not be the increase in consumer spending and increase in business investment that will help increase aggregate demand. The liquidity trap occurs because banks are reluctant to lend to businesses, households, and other financial institutions when they are uncertain about the future and are concerned about whether loans will be repaid. Thus the available liquid to help stimulate the economy remains trapped as excess reserves held at the Federal Reserve banks.