The Fed Pushed Interest Rates to Artificially Low Levels During

question 99

Multiple Choice

The Fed pushed interest rates to artificially low levels during 2002-2004. The Austrian view predicts that this policy will lead to

• A)excessive investment in long-lasting assets like housing that will eventually prove to be unprofitable and result in recession.
• B)an increase in sound investments that will propel future economic growth.
• C)a reduction in the general level of prices that will throw the economy into a recession.
• D)an increase in aggregate demand that will generate sustainable expansion in both real output and employment.

---

Definitions:

Projected Long-Run Needs

Anticipated requirements of a business over an extended period, which influence operational and strategic planning.

Capital Budget

A budget for major capital, or investment, expenditures that are used to acquire or upgrade physical assets such as property and equipment.

Dual Cost Allocation

A method in cost accounting that assigns costs to products or services based on both direct and indirect cost factors.

Variable Costs

Costs that vary in direct proportion to changes in production or sales volume, such as raw materials and sales commissions.