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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. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis? A. both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over B. after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over

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. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis? A. both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over B. after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis? A. both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over O B. after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over O C. in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis O D. neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is over Reset Selection
Transcribed Image Text: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. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis? A. both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over O B. after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over O C. in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis O D. neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is over Reset Selection
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