When economists speak of a "zero lower bound" on interest rates, they actually mean a boundary of a rate that is no lower than roughly:
A) 1%.
B) 5%.
C) -1%.
D) -5%.

Question

Quizplus · Accepted Answer

The "zero lower bound" on interest rates refers to the difficulty in reducing nominal interest rates below zero. While technically rates can be slightly negative, as seen in some European countries and Japan, the concept generally implies that rates cannot effectively be reduced much below 0%, hence -1% is a practical representation of this boundary.

When Economists Speak of a "Zero Lower Bound" on Interest