The Importance of the Bank-Lending Channel of Monetary Policy Transmission

question 64

Multiple Choice

The importance of the bank-lending channel of monetary policy transmission:

• A) becomes more important the more important banks are as a source of funds for firms and individuals.
• B) is likely to become more important with the growth of loan brokers and asset-backed securities.
• C) has become more important as technology has solved the problems of information and moral hazard.
• D) none of the answers given is correct.

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Definitions:

Perfectly Inelastic

A situation where demand does not change at all in response to changes in price.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a certain price over a specified period.

Price Effect

The impact on consumer demand and company revenue as the cost of a good or service changes.

Quantity Effect

The impact on total revenue that results from changing the quantity of goods or services sold, holding all else constant.