Question: a) Why does the conventional monetary policy become ineffective when the economy hits the zero lower bound problem? Explain in words b) What happens to

a) Why does the conventional monetary policy become ineffective when the economy hits the

"zero lower bound" problem? Explain in words

b) What happens to the economy's "self-correcting mechanism" in this case? Explain in words

c) How can the monetary policy stimulate aggregate spending under the zero lower bound

problem? Explain in words. (Hint: Description of one unconventional monetary policy

tool is sufficient.)

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