The purpose for a central bank to set negative interest rates on bank's deposit is to
A)stimulate the economy by encouraging banks to lend out the deposits they were keeping at the central bank.
B)increase bank's cost to holding cash.
C)prevent banks from paying positive interest rates to their depositors.
D)make banks less likely to lend.

Question

Quizplus · Accepted Answer

The purpose of setting negative interest rates is to incentivize banks to lend out their deposits and stimulate the economy. By implementing negative rates, banks are discouraged from holding onto cash and are more likely to lend to customers, which can boost economic growth.

The Purpose for a Central Bank to Set Negative Interest