When Economists State That There Is a Zero Bound on Nominal

question 141

Multiple Choice

When economists state that there is a zero bound on nominal interest rates, they mean that the:

• A) real interest rate cannot go below zero.
• B) nominal interest rate cannot go below zero.
• C) real interest rate can very well be negative.
• D) nominal interest rate can always go below zero.

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Definitions:

Reliability

The consistency of a measure or instrument, such that it yields the same results under consistent conditions across multiple trials.

Variability

The degree to which data points in a statistical distribution or data set diverge from the average or mean value.

Null Hypothesis

A statement in statistical inference that proposes there is no significant difference or effect, serving as the basis for testing.

Expected Value

The predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.