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Austrian Model quiz

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  • Who were the main developers of the Austrian model of economics?
    Carl Menger and Friedrich von Hayek developed the Austrian model between 1890 and 1930.
  • What type of economic system does the Austrian model support?
    The Austrian model supports a free market system over government planning.
  • What is the business cycle according to the Austrian model?
    The business cycle consists of periods of economic expansion followed by recessions.
  • How do lower central bank interest rates affect firm investment in the Austrian model?
    Lower interest rates encourage firms to increase investment by making borrowing cheaper.
  • According to von Hayek, what is the long-term effect of prolonged low interest rates?
    Prolonged low interest rates lead to unstable economic expansions and eventually deeper recessions.
  • How does the Austrian model explain the cause of recessions?
    Recessions are caused by excessive investment fueled by artificially low interest rates.
  • What major economic event does the Austrian model predate?
    The Austrian model predates the Great Depression of the 1930s.
  • Which economic model became more prominent after 1936?
    The Keynesian model became more prominent after 1936.
  • How does the Austrian model differ from the Keynesian model?
    The Austrian model emphasizes free markets and the dangers of low interest rates, while the Keynesian model supports government intervention.
  • What real-world event is cited as fitting the Austrian model well?
    The Great Recession of 2007-2009 is cited as fitting the Austrian model well.
  • What sector saw excessive investment due to low interest rates before the Great Recession?
    The housing sector saw excessive investment due to low interest rates.
  • What happened to the housing market as a result of low interest rates before the Great Recession?
    The housing market experienced a surge and then a bubble, which eventually burst.
  • What does the Austrian model suggest happens after a period of economic expansion caused by low interest rates?
    It suggests that a deeper recession will follow the expansion.
  • Who developed the theory of the business cycle within the Austrian model?
    Friedrich von Hayek developed the theory of the business cycle.
  • What is the main focus of the Austrian model regarding economic fluctuations?
    The main focus is on how low interest rates affect the business cycle and lead to recessions.