Question

Financial Crisis

Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. Refer to Financial Crisis. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts:

a. short-run aggregate supply right.

b. aggregate demand right.

c. aggregate demand left.

d. short-run aggregate supply left.

Answer 1

The correct answer to the given question is “D – Short-Run Aggregate Supply Left”

Step-by-step explanation:

While the problem is there for offering and deriving, less asset is being completed on the budget. Thus due to the lack of capital. The investment standard growing will decrease and therefore as an outcome, short run cumulative source curve will move to the left.