The new Keynesian view of the effect of monetary policy on output stresses the effects of monetary policy on
A)the net worth of borrowers.
B)the willingness of banks to make loans.
C)the ability of banks to make loans.
D)interest rates.

Question

Quizplus · Accepted Answer

The new Keynesian view emphasizes the role of interest rates as a channel through which monetary policy affects output. When the central bank adjusts the interest rate, it changes the cost of borrowing and influences the decisions of households and firms regarding consumption, investment, and borrowing.

The New Keynesian View of the Effect of Monetary Policy