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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Quebec is capable of producing 10 pallets of wood shingles or 8 barrels of maple syrup with a unit of labor. Vermont is capable of producing 12 pallets of wood shingles or 12 barrels of maple syrup with a unit of labor. Assume that this is typical of
the labor force as a whole. Which location has the absolute advantage and which has the comparative advantage, in the production of each good? Can these locations reap gains from trade?