Ask Question
6 August, 22:14

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 both the short-term real interest rate and the financial frictions.

b. lower the financial frictions.

c. lower the policy rate.

d. lower the short-term real interest rate.

+2
Answers (1)
  1. 7 August, 00:31
    0
    The correct answer is B

    Explanation:

    Financial frictions is the stickiness involve in making the transactions, aggregate process comprise of money, time, tax effects and time for gathering the information and make a transaction like borrowing money or purchase a stock.

    So, if the policy rate is zero and stimulate the economy at the provided inflation rates, policymakers should lower or decrease the financial friction.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The real interest rate for investments reflects not only the short-term real interest rate set by the central bank but also the financial ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers