The zero lower bound refers to the situation that
A)the lowest the central bank can decrease the nominal policy rate is 0%.
B)real interest rate is 0%.
C)inflation rate is 0%.
D)risk premium is 0%.

Question

Quizplus · Accepted Answer

The zero lower bound refers to the fact that central banks cannot decrease the nominal policy rate below 0%. This means that when interest rates are already very low, central banks have limited options to stimulate the economy through monetary policy.

The Zero Lower Bound Refers to the Situation That