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.

Question

Braden Steele

Business

13 April, 05:08

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.

+2

Answers (1)

Know the Answer?

Moises Chen · Answer 1

The correct answe is: d) short-run aggregate supply left.

Explanation:

In this regard, one can observe an existing problem of banks that are less able to raise funds and therefore lend less. This cycle leads to less capital inflow, due to the reduced amount of assets in the budget.

Therefore the expected scenario is the behavior of the cumulative curve of the source in the short term moving to the left, due to the decrease in the growth of the investment pattern.