Zero lower bound refers to the fact that
A)the government budget deficit must be zero in the long run.
B)the lowest possible level of the current account deficit is zero in the long run.
C)the inflation rate can never decline below zero.
D)nominal interest rates cannot fall below zero.

Question

Quizplus · Accepted Answer

The zero lower bound refers to the situation where nominal interest rates cannot fall below zero. This makes it difficult for central banks to use their traditional monetary policy tools to stimulate the economy during a recession.

Zero Lower Bound Refers to the Fact That