The zero-lower-bound problem eliminates the ability of the central bank to use which of the following in implementing policy?
A)open market operations
B)discount lending
C)the federal funds rate
D)the required reserve ratio

Question

Quizplus · Accepted Answer

The zero-lower-bound problem occurs when the interest rate reaches zero and cannot be lowered further, which limits the central bank's ability to use the federal funds rate as a tool for implementing policy. However, the central bank can still use open market operations, discount lending, and the required reserve ratio in implementing policy.

The Zero-Lower-Bound Problem Eliminates the Ability of the Central Bank