Which of the following is true of an economy that has hit the zero lower bound?
A. The money supply in the economy increases rapidly as additions are made to the monetary base.
B. Any increase increase in its monetary base is exactly offset by a decline in its money multipliers.
C. Any short-term bond would provide a return that is much lower than the return from holding cash.
D. The economy's interest rates decline when there is an increase in the monetary base.
Answer: B
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