When output is below potential and the policy rate has hit the floor of zero, the resulting fall in inflation leads to real interest rates, which output further, which causes inflation to fall further.

If output is less than potential and the rate of policy has fall to the ground of zero, the subsequent decline in inflation results in high real rate of interest which further depressing output, causing inflation to even further decline.

If the actual output is less than potential output, demand or supply has fallen, resulting in job and output declines

raay18 raay18 · Answer 2 · 2019-12-03T07:04:29+01:00

raay18 raay18

03-12-2019

High real rate Depressing

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When output is below potential and the policy rate has hit the floor of​ zero, the resulting fall in inflation leads to​ ________ real interest​ rates, which​ ________ output​ further, which causes inflation to fall further.

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When output is below potential and the policy rate has hit the floor of zero, the resulting fall in inflation leads to real interest rates, which output further, which causes inflation to fall further.