Many macroeconomists contend that Central Bank interventions to suppress short-term interest rates during economic downturns inevitably create asset price bubbles. However, a recent retrospective analysis of mid-century industrial expansion demonstrates that monetary easing in that era consistently stimulated capital reinvestment without distorting asset valuations. This finding suggests that liquidity injections do not inherently inflate asset values; rather, the modern tendency toward asset bubbles stems primarily from financial deregulation that allows banks to leverage cheap credit for speculative trading.
In the argument given, the two boldfaced portions play which of the following roles?
- The first is empirical evidence presented to challenge a claim opposed by the author; the second is the author's main conclusion.Answer
- BThe first is a position that the author seeks to defend; the second is a premise offered to support that position.
- CThe first is evidence supporting a general rule; the second is an intermediate conclusion drawn to support the macroeconomists' contention.
- DThe first provides background context describing a historical anomaly; the second is an unstated assumption on which the traditional argument relies.
- EThe first is a finding cited to support the claim made by many macroeconomists; the second is a counterargument presented to refute that finding.
Answer
The first bolded statement is empirical evidence presented to challenge a claim opposed by the author; the second is the author's main conclusion.
The correct option accurately identifies that the first bolded statement serves as factual evidence introduced to refute the opposing viewpoint held by many macroeconomists. Furthermore, it correctly identifies the second bolded statement as the author's primary conclusion, which proposes an alternative cause for modern asset price bubbles.
Step-by-Step Solution
Key Concept
Analyzing Bolded Statement Roles