Many borrowers defaulted on subprime mortgages ultimately disrupting financial markets by August 2007.Which of the following is a likely result of this increase in financial frictions?
A)The AD curve likely shifted left which caused a positive inflation gap.
B)The AD curve likely shifted right which caused a positive inflation gap.
C)The AD curve likely shifted left which caused an upward movement along the MP curve to a higher general equilibrium interest rate.
D)The AD curve likely did not shift.
E)none of the above

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The Answer of Many borrowers defaulted on subprime mortgages ultimately disrupting financial markets by August 2007.Which of the following is a likely result of this increase in financial frictions?
A)The AD curve likely shifted left which caused a positive inflation gap.
B)The AD curve likely shifted right which caused a positive inflation gap.
C)The AD curve likely shifted left which caused an upward movement along the MP curve to a higher general equilibrium interest rate.
D)The AD curve likely did not shift.
E)none of the above

Many Borrowers Defaulted on Subprime Mortgages Ultimately Disrupting Financial Markets