Which of the Following Best Describes the Effect of the Zero

question 169

Multiple Choice

Which of the following best describes the effect of the zero interest rate policy implemented in December 2008?

• A)Its effectiveness was limited by the zero lower bound problem.
• B)It created a surge in inflation.
• C)It forced nominal interest rates to below zero.
• D)It had the desired effect, promoting full recovery by 2010.

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Definitions:

Perfectly Competitive

A market structure where there are many sellers and buyers, products are homogeneous, and there is free entry and exit, leading to the price being determined by supply and demand.

Product Market

The marketplace in which finished goods and services are traded between producers and consumers.

Gini Coefficient

A number that summarizes a country’s level of income inequality based on how unequally income is distributed across quintiles.

Income Inequality

The unequal distribution of household or individual income across the various participants in an economy.