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

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Definitions:

Magnetic Metals

Metals that are capable of being attracted by a magnet or can be magnetized, such as iron, nickel, and cobalt.

Magnetized

The state of an object when its electrons are aligned in such a way that it produces its own magnetic field.

Material's Ability

The inherent properties and characteristics of a material that determine its suitability for specific applications or performances.

Permeability

A measurement of a material’s ability to conduct magnetic lines of flux. The standard is air, which has a permeability of 1.