Which of the Following Resulted from Fed Policy That First

question 83

Multiple Choice

Which of the following resulted from Fed policy that first kept short-term interest rates extremely low during 2002-2004, and then pushed them up substantially during 2005-2006?

• A) a reduction in housing prices because variable rate mortgages were unattractive throughout this period
• B) upward pressure on housing prices when the interest rates were low, but downward pressure on the price of housing as the interest rates rose
• C) lower default rates on adjustable rate mortgages as the interest rates peaked during 2006
• D) downward pressure on housing prices when the interest rates were low, but upward pressure on the price of housing as the interest rates rose

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Definitions:

Diffusion of Responsibility

A phenomenon where individuals in a group are less likely to take action or feel accountable for actions because the responsibility is seen as being distributed among all members of the group.

Riskier Decisions

Choices or actions taken that involve a higher level of uncertainty and potential for negative outcomes compared to alternative options.

Group Members

Individuals who belong to a specific group or team, sharing common goals, tasks, or interests.

Groupthink

A phenomenon where the desire for harmony or conformity within a group results in an irrational or dysfunctional decision-making outcome.