A Zero Bound on Nominal Interest Rates Exists Because

question 36

Multiple Choice

A zero bound on nominal interest rates exists because

• A) inflation can never be greater than nominal interest rates.
• B) bank regulations do not allow a zero rate of interest.
• C) the FOMC would not buy bonds at a rate fast enough to drive interest rates to zero.
• D) people would prefer to hold cash at a zero rate of return.
• E) both a and c.

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Definitions:

Sales Quantity

The total number of units of a product sold in a particular period of time.

Costs Per Unit

The total expense incurred to produce, store, and sell one unit of a product, including direct and indirect costs.

Contribution Margin

The surplus of sales revenue over the variable production costs, showing how much revenue aids in covering fixed expenses and producing profit.

Sales Price

The amount of money for which a product or service is sold in the marketplace.