The Real Interest Rate for Investments Reflects Not Only the Short-Term

question 17

Multiple Choice

The real interest rate for investments reflects not only the short-term real interest rate set by the central bank,but also the financial frictions. When the policy rate has hit the floor of zero,to stimulate the economy at given inflation rates,policymakers can

• A)lower the financial frictions.
• B)lower the short-term real interest rate.
• C)lower both the short-term real interest rate and the financial frictions.
• D)lower the policy rate.

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Definitions:

Abdominal Cavity

The space in the human body that houses major organs of digestion, excretion, and reproduction.

Body Cavities

Hollow spaces within the human body that house organs, including the thoracic, abdominal, and pelvic cavities.

Abdominal Cavity

A large body cavity in humans that houses many vital organs under its muscular wall.

Body Cavities

Hollow spaces within the body that house organs, including the thoracic, abdominal, and pelvic cavities, providing protection and allowing organ movement.