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Social Studies, 03.12.2019 05:50 Sk8terkaylee

Why does the​ self-correcting mechanism stop working when the policy rate hits the zero lower​ bound? a. the​ self-correcting mechanism stops working because the rising inflation produced by a negative output gap produces lower rather than higher real interest rates when the policy rate hits the zero lower​ bound, and this decrease depresses planned spending and further widens the output gap. b. the​ self-correcting mechanism stops working because the falling inflation produced by a negative output gap produces lower rather than higher real interest rates when the policy rate hits the zero lower​ bound, and this decrease depresses saving and investment and therefore further widens the output gap. c. the​ self-correcting mechanism stops working because the falling inflation produced by a negative output gap produces higher rather than lower real interest rates when the policy rate hits the zero lower​ bound, and this increase depresses planned spending and further widens the output gap. d. the​ self-correcting mechanism stops working because the rising inflation produced by a positive output gap produces lower rather than higher real interest rates when the policy rate hits the zero lower​ bound, and this decrease enhances planned spending and further widens the output gap.

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Why does the​ self-correcting mechanism stop working when the policy rate hits the zero lower​ bound...
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