Final answer:
According to the Austrian view of the business cycle, expansionary monetary policy that pushes real interest rates to an artificial low is predicted to lead to malinvestments and an unsustainable boom.
Step-by-step explanation:
Expansionary Monetary Policy and the Austrian View of the Business Cycle
According to the Austrian view of the business cycle, when expansionary monetary policy pushes real interest rates to an artificial low, it is predicted to lead to malinvestments and an unsustainable boom.
In simple terms, when interest rates are artificially low, it encourages businesses and individuals to borrow and invest more, even in projects that may not be economically viable in the long run. This leads to a misallocation of resources and can create a bubble that eventually bursts, resulting in a recession or economic downturn.
For example, during the housing bubble in the United States before the 2008 financial crisis, low interest rates encouraged excessive borrowing and investment in the housing market, leading to a housing bubble that eventually collapsed, causing the recession.