According to the Austrian View of the Business Cycle, Expansionary

question 72

Multiple Choice

According to the Austrian view of the business cycle, expansionary monetary policy that pushes the interest rate to an artificially low level will

• A)lead to an increase in long-term investments like houses and office buildings without generating the savings that will be required for their purchase in the future.
• B)lead to a reduction in long-term investments like houses and office buildings that will quickly throw the economy into a recession.
• C)lead to an increase in long-term investments like houses and office buildings that will enhance the long-term growth of the economy.
• D)lead to a reduction in investment, but there will be no impact on output, employment or the general level of prices.

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Definitions:

Increasing Profits

Refers to a scenario where a business experiences a rise in net earnings over a period, typically as a result of higher revenue, cost efficiencies, or favorable market conditions.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of a product or service.

Marginal Cost

The cost of producing one more unit of a good or service, reflecting the increase in total cost that comes from increasing the level of production by one unit.

Maximize Profits

A business objective aiming to achieve the highest possible financial gain from operations.