If not corrected, the financial sector crisis of late 2008 would have tended to

Question

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The financial sector crisis led to a decrease in credit availability, which in turn affected investment and consumption spending. This reduction in spending would lower Real GDP. Additionally, the crisis led to a loss of confidence in the economy, which could lead to a decrease in aggregate demand and lower the general price level. Therefore, if not corrected, the crisis would lead to a lowering of both Real GDP and the general price level.

If Not Corrected, the Financial Sector Crisis of Late 2008