The balance-sheet channel of monetary policy works because it can:

Question

Quizplus · Accepted Answer

The balance-sheet channel of monetary policy works by increasing a borrower's assets and reducing the cost of their liabilities. This can be done through changes in interest rates or asset purchases by the central bank. By increasing asset values and reducing borrowing costs, borrowers can improve their financial position, allowing them to increase spending and investment, which can have positive effects on economic growth and inflation.

The Balance-Sheet Channel of Monetary Policy Works Because It Can