Changes in net worth and liquidity may significantly affect the volume of lending and economic activity according to the
A) interest rate channel.
B) balance sheet channel.
C) money channel.
D) bank lending channel.

Question

Quizplus · Accepted Answer

Changes in net worth and liquidity impact the balance sheets of both borrowers and lenders. This affects their ability and willingness to lend and borrow, thereby influencing the volume of lending and overall economic activity through the balance sheet channel. The other channels mentioned (interest rate, money, and bank lending) are also important in understanding the transmission mechanisms of monetary policy, but do not directly address the impact of changes in net worth and liquidity on lending and economic activity.

Changes in Net Worth and Liquidity May Significantly Affect the Volume