The Real Interest Rate for Investments Reflects Not Only the Short-Term

Multiple Choice

The real interest rate for investments reflects not only the short-term real interest rate set by the central bank,but also the financial frictions. When the policy rate has hit the floor of zero,to stimulate the economy at given inflation rates,policymakers can

A) lower the financial frictions.
B) lower the short-term real interest rate.
C) lower both the short-term real interest rate and the financial frictions.
D) lower the policy rate.