Some Countries Have Negative Nominal Interest Rates

question 31

Multiple Choice

Some countries have negative nominal interest rates. Which of the following statements about this situation is not true?

• A)A saver or lender will get back less than the amount she invested.
• B)This is mostly a result of deliberate central bank policies.
• C)Consumers are expected to save more and consume less.
• D)Consumers are expected to borrow more and spend more.

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Definitions:

Specified Period

A particular duration or timeframe set out in a financial agreement or investment term.

Strike Price

The fixed price at which the owner of an option can purchase (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Risk-Free Rate

The rate of return on an investment with zero risk, typically associated with government bonds, serving as a baseline for evaluating investment risk.

Put Option

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.