The transmission channel related to changing the money supply to change the pattern of bank lending and the availability of funds,to influence economic activity,is known as a:

Question

Quizplus · Accepted Answer

The credit channel refers to the transmission mechanism through which changes in the money supply affect the pattern of bank lending and the availability of credit to borrowers, thereby influencing economic activity. This mechanism works through the balance sheets of banks, which are affected by changes in reserves, interest rates, and borrower risk. The credit channel is an important component of overall monetary policy transmission. Therefore, option A is the correct answer. The monetary policy channel is a broader category that encompasses various transmission mechanisms, including the credit channel. The foreign exchange channel and wealth channel relate to the effect of monetary policy on exchange rates and asset prices respectively, and are not directly related to changes in bank lending and credit availability, making them incorrect choices.

The Transmission Channel Related to Changing the Money Supply to Change