According to Real Business Cycle Theory,an Increase in Financial Frictions

Multiple Choice

According to real business cycle theory,an increase in financial frictions might lead to ________,if ________.

A) a decrease in output;the rise in the credit spread causes a leftward shift of aggregate demand
B) a decrease in inflation;the disruption of capital markets results in a leftward shift of long-run aggregate supply
C) a decrease in output;the disruption of capital markets results in a leftward shift of long-run aggregate supply
D) a decrease in output;a decline in expected output causes a leftward shift of aggregate demand