With Respect to Consumer Behavior, the Interest-Rate Channel of Monetary

question 2

Multiple Choice

With respect to consumer behavior, the interest-rate channel of monetary policy transmission appears to be:

• A)Weak because people's decisions to purchase cars or houses depend on short-term rates rather than long-term rates
• B)Weak because people's decisions to purchase cars or houses depend on long-term rates rather than short-term rates
• C)Strong because people's decisions to purchase cars or houses depend on the short-term rates that policymakers can change
• D)Strong because it affects both spending and saving decisions

---

Definitions:

Cost Of Goods

The total cost incurred to acquire or manufacture the products sold during a specific period.

Conversion Costs

The sum of direct labor costs and manufacturing overhead costs, incurred to convert raw materials into finished products.

Direct Materials

Raw materials that are directly traceable to the manufacturing or production of a specific product.

Direct Labor

Direct Labor is the labor cost directly associated with the production of goods or services, which can be easily traced to individual units of products.