A Transmission Mechanism

question 128

Multiple Choice

A transmission mechanism:

• A) mitigates shocks by spreading them across time and through sectors of the economy.
• B) amplifies shocks by spreading them across time and through sectors of the economy.
• C) causes shocks to have an equal impact across time and sectors of the economy.
• D) turns negative shocks into positive shocks over time.

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Definitions:

Banking System

A network of financial institutions, including banks, that provide financial services to the public and businesses.

Availability Float

The time difference between when a deposit is made in a bank account and when the amount becomes available for use.

Collection Float

The time gap between when a check is deposited into a bank account and when the funds become available.

Opportunity Cost

Opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.