One Criticism of the Fed's Quantitative Easing Policy Is That

question 114

Multiple Choice

One criticism of the Fed's quantitative easing policy is that a prolonged period of low interest rates could lead to speculative bubbles.Some economists argued that as interest rates fell and prices of long-term Treasury bonds rose,financial markets were experiencing a "Treasury bubble." These economists worried that investors,banks,other financial firms,and pension funds were underestimating the likelihood that long-term interest rates would eventually ________,causing substantial ________ in the prices of Treasury bonds.

• A)rise; declines
• B)rise; increases
• C)fall; declines
• D)fall; increases

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Definitions:

Ego

In psychoanalytic theory, the part of the human personality that is rational, reality-oriented, and operates according to the principle of seeking pleasure and avoiding pain.

Pleasure Principle

A psychoanalytic concept that posits individuals seek immediate gratification to avoid pain and increase pleasure, driving much of human behavior.

Freud

Sigmund Freud, an Austrian neurologist who founded the discipline of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Primary Process

A term from psychoanalytic theory that describes the irrational and instinctual thought processes of the unconscious mind.