The Movement Away from Bank Lending Towards Asset-Backed Securities

question 63

Multiple Choice

The movement away from bank lending towards asset-backed securities:

• A) has increased the importance of the bank-lending channel of monetary policy.
• B) has eliminated the bank-lending channel as a mechanism for monetary policy.
• C) has not affected the importance of the bank-lending channel.
• D) will require the FOMC to rethink the quantitative impact of changing the target federal funds rate.

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Definitions:

Market Effects

The impact of economic events or policies on the broader market, including changes in prices, demand, and supply.

Subsidy Benefit

Financial assistance provided by the government to an individual or organization, aiming to reduce costs and encourage specific economic activities.

Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with high elasticity indicating a significant response.

Inelastic Demand

Refers to a situation where the demand for a product does not significantly change with a change in its price.