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 both the short-term real interest rate and the financial frictions.
b. lower the financial frictions.
c. lower the policy rate.
d. lower the short-term real interest rate.
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