Low Interest Rates Are a Signal That

question 3

Multiple Choice

Low interest rates are a signal that:

• A) credit is easy and it is a good idea to borrow money.
• B) credit is tight and it is a bad idea to borrow money.
• C) deflation is on the way.
• D) people are no longer out for profit.

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Definitions:

Bureau of Labor Statistics

A U.S. government agency that collects, processes, analyzes, and disseminates essential statistical data on labor market activity, working conditions, and price changes in the economy.

Demand-Pull Inflation

Inflation caused primarily by an increase in aggregate demand: too many dollars chasing too few goods.

Wage-Price Spiral

A situation where rising wages lead to higher prices, which in turn lead to demands for even higher wages, creating a cycle of inflation.

Joseph Schumpeter

An economist known for his theories on economic development and creative destruction.