The zero-lower-bound problem develops when ________.
A) real interest rates fall close to zero.
B) nominal interest rates fall close to zero.
C) the difference between real and nominal interest rates approaches zero.
D) the sum of real and nominal interest rates approaches zero.

Question

Quizplus · Accepted Answer

The zero-lower-bound problem occurs when nominal interest rates are close to zero, limiting the ability of central banks to implement conventional monetary policy. Real interest rates are not directly related to this problem, nor is the difference between real and nominal rates or their sum.

The Zero-Lower-Bound Problem Develops When ________