Explain the distinction between the zero lower bound and the effective lower bound on nominal interest rates.

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Explain the distinction between the “zero lower bound” and the “effective lower bound” on nominal interest rates. If interest rates were pushed below the effective lower bound, what would be the likely impact on the money multiplier and the supply of bank credit?

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Money Banking and Financial Markets

ISBN: 978-1259746741

5th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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