Due to Asymmetric Information in Credit Markets,monetary Policy May Affect

question 21

Multiple Choice

Due to asymmetric information in credit markets,monetary policy may affect economic activity through the balance sheet channel,where an increase in the money supply

• A)raises stock prices,lowering the cost of new capital relative to firms' market value,thus increasing investment spending.
• B)raises firms' net worth,decreasing adverse selection and moral hazard problems,thus increasing banks' willingness to lend to finance investment spending.
• C)raises the level of bank reserves,deposits,and bank loans,thereby raising spending by those individuals who do not have access to credit markets.
• D)lowers the value of the dollar,increasing net exports and aggregate demand.

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Definitions:

Sieve Tubes

Specialized structures in the phloem of vascular plants that facilitate the transport of sugars and other nutrients.

Companion Cells

Specialized cells in the phloem of plants that manage the functioning and maintenance of the nutrient-conducting sieve-tube elements.

Cognitive Development

The process through which individuals learn and develop their ability to think, understand, and interact with the world.

Stages

Refers to distinct phases within a developmental process or the progression of skills where each phase builds upon the previous one.