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

question 60

Multiple Choice

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. What happens to the price level and real GDP in the short run?

• A)both the price level and real GDP rise
• B)the the price level level rises and real GDP falls
• C)the the price level level falls and real GDP rises
• D)both the price level and real GDP fall

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Definitions:

Government Reorganization

The process of restructuring the operations and structure of governmental bodies to improve efficiency and effectiveness.

Defence Spending

Refers to the allocation of government funds specifically for military and defense purposes.

Berlin Airlift

A military operation in 1948-1949 by which the United States and its allies delivered food and supplies to West Berlin while it was blockaded by the Soviet Union.

June 1948

A significant time period marked by events such as the beginning of the Berlin Blockade during the Cold War.