What are the effects of a financial crisis on short-run aggregate supply? How might long-run aggregate supply be affected?

What will be an ideal response?

A financial crisis affects short-run aggregate supply by first affecting aggregate demand. The decline in economic activity that results from disruption of credit markets causes output to fall below potential output. The resulting slack in the economy prevents producers from raising prices as much as they otherwise would, so both inflation and expected inflation decline, shifting the SRAS curve down. If the financial sector's ability to channel funds to productive opportunities is not quickly restored, businesses will be unable to utilize resources as efficiently as before; the long-run aggregate supply curve has shifted to the left.

Economics

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Goods and services that we buy from firms in other countries are called our

A) imports. B) exports. C) inputs. D) raw materials. E) obligations.

Economics

If marginal cost becomes higher than price, what happens to a company?

(A) The company will lose money on each additional unit produced. (B) Diminishing marginal returns will shrink production. (C) Company specialization will lower the actual price charged. (D) The company will go out of business.

Economics