Conventional monetary policy was limited during the 2008-2009 recession because the central bank could not:

Question

Quizplus · Accepted Answer

Conventional monetary policy involves adjusting the target interest rate to influence spending and investment in the economy. However, during the 2008-2009 recession, the target interest rate reached zero and could not be reduced further. This is known as the zero lower bound. Therefore, the central bank could not use conventional monetary policy to stimulate the economy. Options A, B, and D are not correct because the central bank could purchase bonds, print money, and adjust the discount rate, respectively, but these actions alone were not effective in overcoming the zero lower bound constraint.

Conventional Monetary Policy Was Limited During the 2008-2009 Recession Because