Following the U.S. financial crisis in 2008, some observers assert that the policies of Fed Chairman Greenspan contributed to the crisis. Which of the following is a criticism of Greenspan's policies?
I. The very low interest rates used to fight the 2001 recession were maintained for too long,
leading to the real estate bubble.
II. The Fed provided real estate developers with liquidity to encourage property development
and offered tax breaks to first-time home buyers, which in turn fueled the real estate bubble.
III. The Fed did not promote appropriate regulations to deal with the new financial instruments
that were created in the early 2000s.
A) I and II only.
B) I and III only.
C) II and III only.
D) I, II, and III.
Ans: B) I and III only.
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Everything else held constant, a decrease in net exports ________ aggregate ________
A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply
What is one reason activists might lobby the government to force firms to produce more output than they normally would in a perfectly competitive market?
A) They value consumer surplus more than producer surplus. B) They value producer surplus more than consumer surplus. C) They seek to avoid future regulation. D) They seek to minimize total surplus.
When the law of diminishing returns takes effect
A) firms must add increasingly more input if they are to maintain the same extra amount of output. B) firms must add decreasingly more input if they are to maintain the same extra amount of output. C) more input must be added in order to increase its output. D) a firm must always try to add the same amount of input to the production process.
The reason that some corporations grow so big is
A. double taxation. B. that they are a separate entity from their owners. C. that they have limited liability. D. that they cannot be regulated.