When the zero-lower-bound problem occurs. central banks can rely on:

When the zero-lower-bound problem occurs, central


The zero lower bound occurs wher the short term interest rate reaches near zero and the central bank is unable to stimulate the economy through convestional monetary policy tools. In this case the central bank took the policy of liquidity provision where it extend or increase its lending fecilities to commercial banks to increase the amount of loans and give them more liquidity.

Therefore, the correct option is

  • B. The liquidity provision

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