In response to the zero lower bound problem,
A) the Fed implemented the zero interest rate policy (ZIRP).
B) Congress approved additional ﬁscal stimulus in 2010.
C) the Fed pursued quantitative easing.
D) the Fed ended its forward commitment in order to encourage further lending.

Question

Quizplus · Accepted Answer

When faced with the zero lower bound problem, the Fed pursued quantitative easing, which involved purchasing large amounts of bonds and other financial assets. This policy was designed to stimulate economic growth by lowering long-term interest rates and increasing the money supply. The use of ZIRP (A) and forward commitment (D) were also implemented during this time, but quantitative easing was the primary policy response. Congress approved fiscal stimulus in 2010 (B) in response to the Great Recession, but this was not directly related to the zero lower bound problem.

In Response to the Zero Lower Bound Problem