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How is the idea of a liquidity trap related to the interest elasticity of money demand?...

How is the idea of a liquidity trap related to the interest elasticity of money demand? Under what economic circumstances would a liquidity trap likely occur?

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If the money demand becomes horizontal so that any rise in money supply that shifts the money supply to the right, there is no reduction in the interest rate and only real money balances are imcreased. This implies that money demand has an elasticty value of infinity. This is because % change in interest rate is 0 and so elasticity of money demand = % change in real balances / % change in interest rate = infinite. Under this situation, liquidity trap will occur making LM curve horizontal.

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