The zero lower bound on the nominal interest rate arises because
A) if the nominal interest rate were less than zero, an arbitrage opportunity would exist.
B) bank profits must be zero.
C) the government would not allow it.
D) the economy would crash.
Question 2
Swiss attempts to target monetary aggregates ended in the 1990s because ________.
A) the expectations of Swiss households had evolved from being adaptive to rational
B) structural changes in the economy had rendered existing practices inflationary
C) of the resulting increase in interest rates
D) the ensuing deflation increased the real value of debt held by Swiss manufacturing firms
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