Analysts have attempted to model the impact of monetary policy on net worth by emphasizing
A)the impact of lower interest rates on business spending on fixed investment.
B)the impact of lower interest rates on household spending on housing and durable goods.
C)the liquidity of balance sheet positions as a determinant of business and household spending.
D)the greater variability of business spending compared to household spending.

Question

Quizplus · Accepted Answer

The liquidity of balance sheet positions is a key determinant of business and household spending. When businesses and households have more liquid assets, they are more likely to spend money. This is because they have more confidence in their financial future and are less likely to be worried about saving for a rainy day.

Analysts Have Attempted to Model the Impact of Monetary Policy