The level of household debt incurred over the two decades leading up to the 2008 crisis was only sustainable if interest rates:
A. and housing prices both remained high.
B. remained low and housing prices remained high.
C. remained high and housing prices remained low.
D. and housing prices both remained low.
Answer: B
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Indicate whether the statement is true or false
Potential weaknesses of nominal GDP targeting include
A) it requires accurate estimates of potential GDP growth, which are not easy to achieve. B) it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling. C) real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy. D) it focuses not only on controlling inflation but also explicitly on stabilizing real GDP.