The Direct Impact on Spending of Short-Term Interest Rate Changes

question 28

Multiple Choice

The direct impact on spending of short-term interest rate changes by central banks is:

• A) definitely the strongest of all transmission mechanisms.
• B) not that powerful.
• C) only effective for consumption but not investment.
• D) only effective for net exports but not for investment and consumption.

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Definitions:

Free Market

In a free market, prices are determined only by supply and demand.

Democratic Socialist

Countries are characterized by government ownership of some basic industries and substantial government intervention in the operation of the market.

Organizations

Structured groups of individuals working together to achieve common goals, utilizing systems of governance and processes to facilitate coordinated action.

Democratic Socialism

A political ideology advocating for democratic means to achieve and maintain a socialist economic system.