Negative nominal interest rates
A)cannot happen because of the zero lower bound.
B)can be implemented because the effective lower bound is negative.
C)are not unconventional monetary policy.
D)will reduce investment.
E)are part of conventional monetary policy.

Question

Quizplus · Accepted Answer

Negative nominal interest rates can be implemented because the effective lower bound, where individuals would start holding cash instead of depositing it in banks, is negative. This is an unconventional monetary policy implemented by some central banks to stimulate economic growth and increase inflation. Negative nominal interest rates reduce the cost of borrowing and encourage spending, but can also lead to reduced profitability for banks and potentially harm savers.

Negative Nominal Interest Rates