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.

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Definitions:

Expanded Accounting Equation

An extension of the basic accounting equation that includes components such as owner's equity, retained earnings, and dividends.

Beginning Balances

The balances of accounts at the start of a new accounting period, carried over from the end of the prior period.

Transactions

Financial events that affect the financial position of a company, measurable in terms of changes in assets, liabilities, and equity.

Statement Of Owner's Equity

A financial statement that shows the changes in the ownership interest of a company over a period of time.