Which of the Following Policies That the Fed Followed Between

question 60

Multiple Choice

Which of the following policies that the Fed followed between 2002 and 2005 has been proposed as one of the reasons for the subsequent housing bust and corresponding financial crisis?

• A)The Fed had interest rates that were too high during this period.
• B)The Fed had interest rates that were too volatile during this period.
• C)The Fed had interest rates that were too low during this period.
• D)The Fed had legal reserve requirements that were too high during this period.
• E)None of these.

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Definitions:

Additional Revenue

Income gained from any additional unit of output or sale beyond the current level of production or service.

Rent

A payment made by tenants to landlords in exchange for the use of real estate, equipment, or other properties.

Marginal Physical Product

The additional output that can be produced by adding one more unit of a specific input, holding all other inputs constant.

MRP

Marginal Revenue Product; the additional revenue generated from employing one more unit of input or labor.