Suppose a financial crisis prevents many companies to get loans so that their production levels fall as they are unable to purchase the same amount of inputs as before. We can conclude that the economy is

Question

Quizplus · Accepted Answer

If companies are unable to purchase the same amount of inputs as before due to a financial crisis preventing them from acquiring loans, their production levels will fall. This means that the economy is operating inside the production possibility curve, as it is producing below its potential level of output. This is because the economy is unable to access the necessary resources to produce at full capacity.

Suppose a Financial Crisis Prevents Many Companies to Get Loans