Many economists have argued that the Federal Reserve should have taken actions to burst the U.S. housing bubble. However, bursting of the housing bubble by the Federal Reserve would have caused:
A) the AD curve to shift inward.
B) the SRAS curve to shift inward.
C) the LRAS curve to shift inward.
D) interest rates to fall even further.

Question

Quizplus · Accepted Answer

Bursting the housing bubble would likely lead to a decrease in consumer wealth and spending, causing the aggregate demand (AD) curve to shift inward.

Many Economists Have Argued That the Federal Reserve Should Have