the economics of money, banking, and financial markets

851 $

© 2014 Pearson Canada Inc.$

Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 27 Transmission Mechanisms of Monetary Policy

27.1 Transmission Mechanisms of Monetary Policy

1. 
   

   Economic theory suggests that ____ interest rates are ____ important than ____
   interest rates in explaining investment behavior.
   A) nominal; more; real
   B) real; less; nominal
   C) real; more; nominal
   D) market; more; real
   Answer: C
   Diff: 2 Type: MC Page Ref: 638
   Skill: Recall
   Objective List: 27.1 Outline the transmission mechanisms of monetary policy

   
   


2. 
   

   According to the traditional interest-rate channel, expansionary monetary policy lowers the
   real interest rate, thereby raising expenditure on ____.
   A) business investment decisions
   B) government expenditure
   C) consumer nondurables
   D) net exports
   Answer: A
   Diff: 2 Type: MC Page Ref: 638
   Skill: Recall
   Objective List: 27.1 Outline the transmission mechanisms of monetary policy

   
   


3. 
   

   The monetary transmission mechanism that links monetary policy to GDP through real
   interest rates and investment spending is called the ____.
   A) traditional interest-rate channel
   B) Tobins' q theory
   C) wealth effects
   D) cash flow channel
   Answer: A
   Diff: 2 Type: MC Page Ref: 638
   Skill: Recall
   Objective List: 27.1 Outline the transmission mechanisms of monetary policy