In mid-2021, an article in the Wall Street Journal noted that the European Central Bank had...

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In mid-2021, an article in the Wall Street Journal noted that the European Central Bank had been paying a negative interest rate on the reserve accounts of banks. In addition, interest rates on many government bonds, such as Germany's 10-year bond were negative, and some European banks had begun to pay negative interest rates on their customers' deposits. The article quoted one German depositor as saying, "I wouldn't mind receiving nothing for my deposit, but being asked to pay is just too much." Source: Patricia Kowsmann, "Banks in Germany Tell Customers to Take Deposits Elsewhere," Wall Street Journal, March 1, 2021. Why was the European Central Bank paying a negative interest rate on banks' reserves? A. The prices of some long-term ECB bonds had risen to such high levels that the yields on the bonds were actually negative. B. The prices of some long-term ECB bonds had fallen to such low levels that the yields on the bonds were actually negative. C. Long-term interest rates were so low after rounds of central bank contractionary policy that bond yields were pushed negative. D. Long-term interest rates were so high after rounds of central bank expansionary policy that bond yields were pushed negative. Why are inv stors willing to buy Germ with a negative interest rate? government bo A. They believed that there was no chance the German government would default on its bonds, while the default risk on corporate bonds and bank deposits was high because interest rates were so high. B. They believed that there was no chance the German government would default on its bonds, while the default risk on corporate bonds and bank deposits was high because interest rates were so low. C. Concerns over the stability of the European Central Bank meant that German bonds were more attractive to investors. D. Other countries were defaulting on their bonds, while Germany was not. What actions would you expect depositors in Germany to take in response to German banks paying negative interest rates on bank deposits? A. They would wait for the German government to enact policies to force banks to pay positive interest rates. B. Depositors would put more money into the banks and use more credit for transactions since interest rates were so low. C. Depositors would put more money into the banks in the hopes of driving the interest rate up on bank deposits. D. Depositors would pull their money out of the banks and probably begin using more cash for transactions. In mid-2021, an article in the Wall Street Journal noted that the European Central Bank had been paying a negative interest rate on the reserve accounts of banks. In addition, interest rates on many government bonds, such as Germany's 10-year bond were negative, and some European banks had begun to pay negative interest rates on their customers' deposits. The article quoted one German depositor as saying, "I wouldn't mind receiving nothing for my deposit, but being asked to pay is just too much." Source: Patricia Kowsmann, "Banks in Germany Tell Customers to Take Deposits Elsewhere," Wall Street Journal, March 1, 2021. Why was the European Central Bank paying a negative interest rate on banks' reserves? A. The prices of some long-term ECB bonds had risen to such high levels that the yields on the bonds were actually negative. B. The prices of some long-term ECB bonds had fallen to such low levels that the yields on the bonds were actually negative. C. Long-term interest rates were so low after rounds of central bank contractionary policy that bond yields were pushed negative. D. Long-term interest rates were so high after rounds of central bank expansionary policy that bond yields were pushed negative. Why are inv stors willing to buy Germ with a negative interest rate? government bo A. They believed that there was no chance the German government would default on its bonds, while the default risk on corporate bonds and bank deposits was high because interest rates were so high. B. They believed that there was no chance the German government would default on its bonds, while the default risk on corporate bonds and bank deposits was high because interest rates were so low. C. Concerns over the stability of the European Central Bank meant that German bonds were more attractive to investors. D. Other countries were defaulting on their bonds, while Germany was not. What actions would you expect depositors in Germany to take in response to German banks paying negative interest rates on bank deposits? A. They would wait for the German government to enact policies to force banks to pay positive interest rates. B. Depositors would put more money into the banks and use more credit for transactions since interest rates were so low. C. Depositors would put more money into the banks in the hopes of driving the interest rate up on bank deposits. D. Depositors would pull their money out of the banks and probably begin using more cash for transactions.

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