Long Recessions Often Follow Banking Crises Because

Multiple Choice

Long recessions often follow banking crises because:

A) banking crises may cause a surplus of credit, so that interest rates fall to levels so low that investors earn very little in interest income.
B) the vicious cycle of deleveraging that follows leads to overpriced assets.
C) consumer and investment spending increase too rapidly, causing high rates of inflation.
D) monetary policy is not very effective because banks hold on to excess reserves and are unwilling to lend them out.