A transmission mechanism:
A) mitigates shocks by spreading them across time and through sectors of the economy.
B) amplifies shocks by spreading them across time and through sectors of the economy.
C) causes shocks to have an equal impact across time and sectors of the economy.
D) turns negative shocks into positive shocks over time.

Question

Quizplus · Accepted Answer

A transmission mechanism, especially in the context of monetary policy or economic shocks, often amplifies shocks by spreading their effects across different sectors of the economy and over time, rather than mitigating them or equalizing their impact. This can lead to wider economic implications than the initial shock might have had in isolation.

A Transmission Mechanism