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2. (5 points) a. (3 points) What is the Zero Lower Bound (ZLB)? Use the Fisher equation to calculate the lowest level of real interest

2. (5 points) a. (3 points) What is the Zero Lower Bound (ZLB)? Use the Fisher equation to calculate the lowest level of real interest rates the CB can achieve for a given level of inflation. HINT: The Fisher equation relates the inflation rate to the nominal and real interest rates. b. (2 points) Explain why policy makers are "scared" of deflation? How does deflation affect monetary policy

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