The combined efforts of the Fed and the Treasury in response to the financial crisis following the housing market crash were:
A) effective in restoring aggregate supply to its pre-crisis level, but still left the economy with sluggish aggregate demand.
B) ineffective in restoring aggregate supply to its pre-crisis level, and output remained far below potential.
C) effective in restoring aggregate supply to its pre-crisis level, but left the economy facing severely increasing inflation.
D) ineffective in restoring aggregate supply to its pre-crisis level, but output increased due to increased consumer confidence boosting aggregate demand.
Correct Answer:
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