Suppose That the Overnight Interest Rate Falls to Zero and Output

question 78

Multiple Choice

Suppose that the overnight interest rate falls to zero and output is below potential output.A central bank could:

• A)seek to reduce expectations of future policy rates.
• B)use its balance sheet to expand the monetary base.
• C)purchase securities of different maturities to affect their market prices and rates.
• D)all of the answers given are correct.

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