The transmission channel that affects the value of assets and liabilities within the domestic economy,and thus influences economic activity,is known as a:

Question

Quizplus · Accepted Answer

The transmission channel that affects the value of assets and liabilities within the domestic economy and influences economic activity is known as the wealth channel. This channel operates through changes in the overall wealth of households and firms, which affect their spending and investment decisions. When asset prices rise, households and firms feel wealthier and tend to spend more, which boosts economic activity. Conversely, when asset prices fall, households and firms feel poorer and tend to reduce their spending and investment, which can dampen economic activity.

The Transmission Channel That Affects the Value of Assets and Liabilities