The ZIRP (zero interest rate policy) of the Fed led to the so-called zero lower bound problem, which refers to the problem of
A) having a very low level of employment with zero new jobs created.
B) huge budget deﬁcits leaving the government no more ability to spend.
C) interest rates that can't go any lower, i.e., they cannot be driven down below zero.
D) zero real-GDP growth due to very weak aggregate demand.

Question

Quizplus · Accepted Answer

The zero lower bound problem refers to the fact that interest rates cannot be driven down below zero, meaning that monetary policy becomes less effective in stimulating the economy during a recession. This can lead to a situation where the economy remains stuck in a low-growth, low-inflation environment.

The ZIRP (Zero Interest Rate Policy) of the Fed Led