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.

---

Definitions:

Unemployment Insurance

A government program that provides temporary financial assistance to workers who have lost their job and meet certain eligibility requirements.

Minimum-Wage Law

Legislation that sets the lowest hourly rate that can be paid to workers, intended to ensure a minimum standard of living for employees.

Unemployed

The status of a person who is capable of working, is seeking work, but is unable to find employment.

Unemployment Insurance

A government-provided insurance that offers financial assistance to unemployed workers who have lost their jobs through no fault of their own.