A promise by the central bank to maintain its key policy rate at the effective lower bound for an extended period of time is called a(n)___________ commitment.
A) overnight lending
B) prime rate
C) credit easing.
D) zero interest rate.
E) long-term real interest rate

Question

Quizplus · Accepted Answer

A promise by the central bank to maintain its key policy rate at the effective lower bound (i.e., zero percent) for an extended period of time is called a zero interest rate commitment. This type of commitment is used as a monetary policy tool to stimulate economic activity and can help provide certainty to investors and borrowers about the level of interest rates in the future. Option A (overnight lending) and Option C (credit easing) refer to specific monetary policy tools, while Option B (prime rate) and Option E (long-term real interest rate) are not directly related to a commitment by the central bank to maintain interest rates at a certain level.

A Promise by the Central Bank to Maintain Its Key