The current low interest rates are seen as an indicator of secular stagnation because
A)the high savings rates of baby boomers.
B)insufficient demand for investment spending.
C)increases in government borrowing.
D)increases in consumer debt.
E)increasing net exports.

Question

Quizplus · Accepted Answer

Low interest rates suggest that there is insufficient demand for investment spending, which is one of the symptoms of secular stagnation according to the theory proposed by economist Larry Summers. High savings rates of baby boomers may also contribute to the problem, but it is not the most direct cause of low interest rates. Increases in government borrowing, consumer debt, and export demand do not necessarily lead to low interest rates or secular stagnation.

The Current Low Interest Rates Are Seen as an Indicator