Which of the following is a primary goal of implementing negative interest rates?
Understand the Problem
The question asks about the primary objective behind implementing negative interest rates by a central bank. It requires understanding the intended effects of such a policy on banks, borrowing, spending, exchange rates, and currency value.
Answer
To incentivize spending and borrowing, stimulating economic activity.
The primary goal of implementing negative interest rates is to incentivize spending and borrowing rather than saving, to stimulate economic activity.
Answer for screen readers
The primary goal of implementing negative interest rates is to incentivize spending and borrowing rather than saving, to stimulate economic activity.
More Information
Negative interest rates are a tool used by central banks to encourage lending and discourage holding cash, especially when inflation is low and economic growth is slow.
Tips
A common misunderstanding is that negative interest rates are designed to punish savers. While savers may see lower returns, the overall goal is to boost the economy, which can benefit everyone in the long run.
Sources
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