Source: Knewton
Economist: Periodic economic instability invariably leads to calls from politicians for the abolition of the federal reserve system. These representatives baselessly assert that, without the interest rate manipulation of the federal reserve banks, cyclical recessions would be significantly shorter and less severe. In fact, the reverse is true; the most recent period of depressed economic activity finally ended only after the federal reserve chairman made a series of adjustments to the discount rate, which led to increased consumer spending and normalization of the stock market.
Which of the following, if true, most seriously calls into question the reasoning employed by the economist?
A: Many economists disagree with the idea that the federal reserve chairman is the prime mover of economic activity during a recession.
B: The most recent recession was caused by mismanagement of interest rates by the former federal reserve chairman.
C: Federal reserve chairmen cannot know all of the variables that may influence the market at any given moment.
D: Recessions are not always cyclical, as bad economic policies can both lead to several consecutive “mini” recessions or indefinitely prolong an existing recession into a decades-long malaise.
E: The chairman of the federal reserve always makes interest rate adjustments once there are clear economic signals indicating that stock prices have stabilized and that aggregate consumer spending has risen. *
Economist: Periodic economic instability invariably leads to calls from politicians for the abolition of the federal reserve system. These representatives baselessly assert that, without the interest rate manipulation of the federal reserve banks, cyclical recessions would be significantly shorter and less severe. In fact, the reverse is true; the most recent period of depressed economic activity finally ended only after the federal reserve chairman made a series of adjustments to the discount rate, which led to increased consumer spending and normalization of the stock market.
Which of the following, if true, most seriously calls into question the reasoning employed by the economist?
A: Many economists disagree with the idea that the federal reserve chairman is the prime mover of economic activity during a recession.
B: The most recent recession was caused by mismanagement of interest rates by the former federal reserve chairman.
C: Federal reserve chairmen cannot know all of the variables that may influence the market at any given moment.
D: Recessions are not always cyclical, as bad economic policies can both lead to several consecutive “mini” recessions or indefinitely prolong an existing recession into a decades-long malaise.
E: The chairman of the federal reserve always makes interest rate adjustments once there are clear economic signals indicating that stock prices have stabilized and that aggregate consumer spending has risen. *
Yellow Sapphire
