The "Greenspan Doctrine" - Central Banks Should Not Try to Prick

question 27

Multiple Choice

The "Greenspan doctrine" - central banks should not try to prick bubbles - was based on which of the following arguments?

• A) Asset-price bubbles are nearly impossible to identify.
• B) Monetary actions would be likely to affect asset prices in general, rather than the specific assets that are experiencing a bubble.
• C) Raising interest rates has often been found to cause a bubble to burst more severely.
• D) Monetary policy actions to prick bubbles can have harmful effects on the aggregate economy.
• E) all of the above.

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Definitions:

Theory-Theory

A concept in cognitive science that suggests that individuals use internal models, or "theories," to make sense of their experiences.

Overimitate

The process of imitating actions or behaviors more precisely or more extensively than required, often observed in children.

Irrelevant Behavior

Actions or responses that do not pertain to or have any bearing on the current context or goals.

Mindlessly Copy

To imitate or replicate something without thoughtful consideration or awareness of the consequences.