Welcome to English Corner
This is part of the English-language corner of the website - a space with different formats of English-language economics content: terms and articles, vocabulary trainers, tests, and materials for the international ("межнар") track. Below is one example of such a task, in the "качественная задача" (case/open-question) format used in international olympiads.
About this business task
This task is adapted from the International Economics Olympiad (IEO) 2026, Economics and Finance Open Questions section. The IEO is the world's largest annual economics and finance competition for high school students, held in a different host country each year, and one of the recognized international ("межнар") tracks that students who succeed at the All-Russian Olympiad in Economics can go on to compete in.
This particular question tests whether you can apply core location-theory and externality concepts to an unusual, real-world-flavored scenario - deciding whether to build an AI computing facility on Earth or in orbit. It combines conceptual reasoning (parts a, c, d) with straightforward quantitative comparison (part b), which is typical of the IEO's Open Question format: you're expected to explain your economic logic, not just produce a number.
Work through each part in order. Try to write a full argument before checking the solution - many points in the real marking scheme are awarded for reasoning, not just the final answer.
Question 2. "Effective Lower Bound" (30 raw points)
By the assumption made by many standard textbooks and models, zero is the lower bound of an interest rate, limiting the central bank's capacity to stimulate the economy through monetary policy loosening. This assumption has been disputed recently, as central banks of several countries have set interest rates at negative levels.
Some economists tried to identify (at least theoretically) the interest rate which is, indeed, a lower bound for expansionary monetary policy. They have found that for an interest rate below some (probably negative) level, the further decrease may surprisingly be contractionary. This task will walk you through their reasoning.