Which of the following best describes the effect of the zero interest rate policy implemented in December 2008?
A)Its effectiveness was limited by the zero lower bound problem.
B)It created a surge in inflation.
C)It forced nominal interest rates to below zero.
D)It had the desired effect, promoting full recovery by 2010.

Question

Quizplus · Accepted Answer

The zero interest rate policy was limited by the zero lower bound problem, which means that nominal interest rates cannot go below zero, limiting the central bank's ability to stimulate the economy further through traditional monetary policy.

Which of the Following Best Describes the Effect of the Zero