Investment spending was depressed in Japan in the 1990s because
A) real interest rates were too high.
B) the yen was overvalued.
C) nominal interest rates were too high.
D) no one was exactly sure which institutions were bankrupt, so no one was anxious to lend money to anyone.

Question

Quizplus · Accepted Answer

The 1990s in Japan were characterized by a period of economic stagnation and financial uncertainty, often referred to as the "Lost Decade." One of the key issues was the lack of clarity regarding the financial health of many institutions, which led to a significant decrease in lending and investment activities. Investors and lenders were cautious, fearing that they might not recover their investments if they lent to or invested in entities that might be insolvent or on the verge of bankruptcy. This uncertainty severely impacted investment spending, as both individuals and businesses were reluctant to commit capital without clear indications of financial stability.

Investment Spending Was Depressed in Japan in the 1990s Because