In an environment of negative interest rates:
A) people are paid to borrow money.
B) people are encouraged to hold less in bank deposits and more in cash.
C) banks are better off lending at any interest rate greater than the negative interest rates they face on unloaned excess reserves, even if those rates are negative.
D) all of these occur.

Question

Quizplus · Accepted Answer

In an environment of negative interest rates, borrowers may effectively be paid to borrow money (A), people are encouraged to hold less in bank deposits and more in cash to avoid negative returns (B), and banks may prefer to lend at any rate above the negative rates they face on excess reserves (C).

In an Environment of Negative Interest Rates