If the Central Bank Is Facing the Zero Bound Constraint

question 59

Multiple Choice

If the central bank is facing the zero bound constraint and announces a higher inflation target,

• A) the real interest rate will increase, which will decrease aggregate expenditure.
• B) the real interest rate will decrease, which will increase aggregate expenditure.
• C) the nominal interest rate will increase, which will decrease aggregate expenditure.
• D) the nominal interest rate will decrease, which will increase aggregate expenditure.

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Definitions:

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Life Stress Perspective

The viewpoint that psychological stress and disorders arise from the pressures and demands placed on individuals by life's challenges and circumstances.

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