Which of the following pieces of advice is an advocate of the bank lending channel most likely to give to officials in an emerging market economy?
A)Focus on the development of financial markets because they will be the chief sources of funds to business.
B)Make sure that financial institutions are developed along with financial markets.
C)Keep interest rates low to enable young, growing enterprises to borrow in financial markets.
D)Use credit controls to deal with excessive bank lending.

Question

Quizplus · Accepted Answer

An advocate of the bank lending channel is likely to emphasize the importance of developing both financial markets and financial institutions. This will help ensure that businesses have access to a range of funding sources, including bank loans. Option A may not be sufficient as banks still remain important lenders in emerging markets. Option C may pose a risk of inflation if not balanced properly, and option D may not be an ideal solution as credit controls may limit credit availability for growing enterprises.

Which of the Following Pieces of Advice Is an Advocate