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.

Question

Quizplus · Accepted Answer

The Austrian view suggests that artificially low interest rates lead to malinvestment, particularly in long-term projects like housing, which eventually become unprofitable, causing a recession.

The Fed Pushed Interest Rates to Artificially Low Levels During