Negative nominal interest rates
A) are part of conventional monetary policy.
B) cannot happen because of the zero lower bound.
C) can be implemented because the effective lower bound is negative.
D) will reduce investment.
E) are not unconventional monetary policy.

Question

Quizplus · Accepted Answer

Negative nominal interest rates can be implemented when the effective lower bound is negative, which means that central banks can lower interest rates below zero. This is considered an unconventional monetary policy, and it aims to boost borrowing and spending to stimulate economic growth. However, there are limitations to how negative interest rates can go because they can lead to unintended consequences, such as reducing investment and damaging bank profitability.

Negative Nominal Interest Rates