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. How is the new long-run equilibrium different from the original one?
A) both price and real GDP are higher.
B) both price and real GDP are lower.
C) the price level is the same and GDP is lower.
D) the price level is lower and real GDP is the same.

Question

Quizplus · Accepted Answer

The Answer of 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. How is the new long-run equilibrium different from the original one?
A) both price and real GDP are higher.
B) both price and real GDP are lower.
C) the price level is the same and GDP is lower.
D) the price level is lower and real GDP is the same.

Financial Crisis Suppose That Banks Are Less Able to Raise Funds and Funds