Expansionary monetary policy that leads to lower interest rates, thus encouraging more borrowing to buy homes, is described by the
A)bank lending channel.
B)money channel.
C)balance sheet channel.
D)financial market channel.

Question

Quizplus · Accepted Answer

Expansionary monetary policy that leads to lower interest rates is primarily associated with the money channel, as it affects the quantity and cost of money and credit available in the economy. Lower interest rates encourage more borrowing for investment, stimulating economic growth. The bank lending channel involves the effects of monetary policy on the lending decisions of banks, the balance sheet channel involves the effects on the balance sheets of households and businesses, and the financial market channel involves the effects on asset prices and the overall functioning of financial markets. However, while these channels may also play a role in transmitting the effects of monetary policy, the money channel is most directly associated with changes in interest rates.

Expansionary Monetary Policy That Leads to Lower Interest Rates, Thus