The fact that investors can always hold cash creates:

Question

Quizplus · Accepted Answer

When investors can always hold cash, they are less likely to invest their money, even if interest rates are very low. This creates a problem for monetary policymakers when short-term interest rates approach zero, as they are unable to stimulate the economy through conventional monetary policy tools. This phenomenon is known as the zero lower bound.

Option B is incorrect because negative nominal interest rates are not yet offered by the US treasury.

Option C is partially correct but doesn't fully answer the question.

Option D is incorrect as negative nominal interest rates are not currently in existence.

The Fact That Investors Can Always Hold Cash Creates