Liquidity constraint

Liquidity constraint is a restriction on the amount a person can borrow from a financial institution, which limits the person's ability to spend his future income today; also called a borrowing constraint.

Definition

According to Macroeconomics by Mankiw (7th edition),

Liquidity constraint. A restriction on the amount a person can borrow from a financial institution, which limits the person's ability to spend his future income today; also called a borrowing constraint.