Explain the concept of zero lower bound
What will be an ideal response?
If an interest rate hits zero, economists say that it has hit the zero lower bound. This language implies that zero is a barrier – or a boundary line - that nominal interest rates cannot cross.
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Applying neoclassical theory to the housing market, ________ cause a decrease in the user cost of housing
A) higher expected household incomes B) higher rates of household formation C) increases in the expected relative price of housing D) tighter constraints on mortgage financing
Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect the:
a. demand for honey to increase. b. demand for honey to decrease. c. quantity demanded of honey to decrease. d. price of honey to decrease. e. quantity demanded of honey to increase.