Question

The recessions accompanied by a financial crisis are more severe than recessions that do not involve bank crises because O A. people use the easy credit to buy assets when their income and credit are not sufficiently high ( B. severe financial crises reduce savings, increase consumption and reduce exports thereby increasing the trade deficit C. severe financial crises collapse asset markets, lower real housing prices and cause a significant fall in GDP and employment. D. bank failures reduce the money supply, increase the interest rate and cause high inflation The large budget deficits of $1.4 trillion in fiscal year 2009 and $1.3 trillion in fiscal year 2010 were O A. caused partly by the increase in government spending including spending to bail out failed financial institutions and by the deep decline in tax revenues as incomes and profits fell. O B. caused by the crowding out effect of increased government spending and increased welfare spending C. caused mostly by huge bailouts given to big investment banks and insurance companies O D. the result of the ailing social security and Medicare programs and the growing number of aging baby-boomers receiving benefits.

Answer 1

The correct option is d)

bank failures reduce the money supply, increase the interest rate and cause high inflation .

The correct option for the second question is a)

caused partly by the increase in government spending including spending to bail out failed financial institutions and by the deep decline in tax revenues as incomes and profits fell.

Step-by-step explanation:

The recessions accompanied by a financial crisis are more severe than recessions that do not involve bank crises because ;

bank failures reduce the money supply, increase the interest rate and cause high inflation.

The large budget deficits of $1.4 trillion in fiscal year 2009 and $1.3 trillion in fiscal year 2010 were

;

caused partly by the increase in government spending including spending to bail out failed financial institutions and by the deep decline in tax revenues as incomes and profits fell.