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16 February, 01:18

Regarding the overall effect of negative interest rates on the economy, economists

A. are in general agreement that the overall effect is negative, because economic activity will slow down.

B. are in general agreement that the overall effect is positive, because economic activity will be stimulated.

C. are still debating, awaiting the results of the real-world "experiments" in several countries.

D. believe that negative interest rates simply cannot happen in reality.

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Answers (1)
  1. 16 February, 01:44
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    The effect of negative interest rates on the economy is reflected in option D: negative interest rates simply cannot happen in reality. Answer D is the correct response.

    Explanation:

    Answer C is partially correct. In reality, experiments are running on economies as today: Greece economy. After a huge recession in previous years, the Government has released bonuses that, at the end of their effective period, will be charging people for actually buy them, and not paying them back. This leads us to answer D: negative interest rates can actually happen, but they cannot exist as an economic mechanism that develops the economy: customers will go for profit, not cost.

    The effect of this model is negative on the economy since it will not provide enough resources for stimulation. Also, it will not slow it down since it is not expected that an instrument with negative interest rates will be accepted, in the form of bonuses, by customers; or loans, provided by banks.
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