Question
is the zero lower bound problem?
Multiple choice question.
Nominal interest rates cannot be driven lower than zero without causing depositors to withdraw funds from the banking system.
Nominal interest rates cannot be driven higher than zero without causing depositors to withdraw funds from the banking system.
Nominal interest rates set at a level other than zero will cause depositors to withdraw funds from the banking system.
Nominal interest rates must be higher than inflation to avoid causing depositors to withdraw funds from the banking system.
Multiple choice question.
Nominal interest rates cannot be driven lower than zero without causing depositors to withdraw funds from the banking system.
Nominal interest rates cannot be driven higher than zero without causing depositors to withdraw funds from the banking system.
Nominal interest rates set at a level other than zero will cause depositors to withdraw funds from the banking system.
Nominal interest rates must be higher than inflation to avoid causing depositors to withdraw funds from the banking system.
Answers
GPT-4o mini
The correct answer is:
**Nominal interest rates cannot be driven lower than zero without causing depositors to withdraw funds from the banking system.**
This describes the zero lower bound problem, which refers to the difficulty that central banks encounter when they want to lower interest rates to stimulate the economy but cannot lower them below zero, as depositors would rather hold cash than pay to keep their money in the bank.
**Nominal interest rates cannot be driven lower than zero without causing depositors to withdraw funds from the banking system.**
This describes the zero lower bound problem, which refers to the difficulty that central banks encounter when they want to lower interest rates to stimulate the economy but cannot lower them below zero, as depositors would rather hold cash than pay to keep their money in the bank.