When Expansionary Monetary Policy Pushes Real Interest Rates to an Artificial

question 18

Multiple Choice

When expansionary monetary policy pushes real interest rates to an artificial low, the Austrian view of the business cycle predicts this will lead to

• A)an increase in aggregate demand and a lengthy expansion in real output.
• B)a recession, followed by a strong and lengthy expansion in real output.
• C)malinvestment during an economic boom, followed by a recession.
• D)malinvestment during a temporary recession, followed by a strong and lengthy economic boom.

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