Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less a

[answerhappygod]

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
C. in the long-run equilibrium after the crisis is over but not
after the economy reaches long-run equilibrium during the
crisis
D. neither after the economy reaches long-run equilibrium during
the crisis nor in the long-run equilibrium after the crisis is
over