Question
Suppose you are an advisor to Jerome Powell, chairman of the Federal Reserve System. He wants to know whether to lower interest rates, or raise
Suppose you are an advisor to Jerome Powell, chairman of the Federal Reserve System. He wants to know whether to lower interest rates, or raise interest rates. He tells you: by lowering interest rates we will let the market do its job, and businesses will want to invest. You reply that
A. Yes, lowering interest rates will always let the market do its job well.
B. Lowering interest rates too much will result in too many businesses borrowing, which could raise default risk
C. Higher interest rates could also be bad because the businesses willing to pay high rates might be taking on risky ventures.
D. Both B and C.
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