Which of the Following Best Describes How a Fall in Asset

question 33

Multiple Choice

Which of the following best describes how a fall in asset prices reduces output?

• A)Asset crash → number of banks ↓→ loans ↓→ AE ↓→ output ↓
• B)Asset crash → wealth ↓→ loans ↑→ inflation ↑→ output ↓
• C)Asset crash → wealth ↓→ consumption ↓→ AE ↓→ output ↓
• D)Asset crash → risk ↓→ loans ↑→ inflation ↓→ output ↓

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