In the Bank Lending Channel, an Important Reason for Output

question 82

Multiple Choice

In the bank lending channel, an important reason for output increases in the short run after an expansionary monetary policy is that

• A)the funds directly available for households and firms to spend will increase.
• B)prices will increase, making increased production more profitable for firms.
• C)the increase in government spending from an expansionary monetary policy increases output through the multiplier effect.
• D)the ability of banks to make loans will increase.

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Definitions:

Synapse

The tiny space between the nerve ending of one neuron and the dendrite of another.

Nerve Ending

The region at the end of a neuron from which an impulse is sent to a neighboring neuron.

Dendrite

An extension located at one end of a neuron that receives impulses from other neurons.

Superego

In psychoanalytic theory, the part of a person's mind that acts as a self-critical conscience, reflecting social standards learned from parents and teachers.