Exam 27: Information Problems and Channels for Monetary Policy

Which of the following occurs as a result of an increase in the money supply in the bank lending channel view, but does not occur in the money lending channel view?

For breakdowns in lending by financial institutions to affect the volume of funds flowing from savers to borrowers,

Expansionary monetary policy that leads to lower interest rates, thus encouraging more borrowing to buy homes, is described by the

In the money channel, an expansionary monetary policy will shift to the right

During the financial panic of the early 1930s

The finding that bank loans decline and the volume of commercial paper issued increases when the Fed contracts the level of bank reserves appears to indicate that

In the balance sheet channel, when households have high levels of liquid assets relative to their liabilities, they are more willing to invest in consumer durable goods or housing because

Large firms find external funds to be more costly than internal funds because

Economists have found that the greater is a borrower's net worth compared to the borrower's desired level of capital investment

A credit crunch

If the bank lending channel is correct, a credit crunch in bank lending should

If banks become less willing to make loans, the aggregage demand curve

An increase in the money supply can reduce the probability of financial distress by

An increase in the willingness of banks to lend will result in

Why are banks able to offer funds more cheaply to many borrowers than can financial markets?

What did President George H. W. Bush and his advisers believe was causing the weakness in the U.S. economy in the fall of 1991?

Disintermediation involves

Why do banks engage in credit rationing? If a potential borrower appears to be a poor credit risk, why don't banks simply charge a high enough interest to compensate for the increased probability of default?

Which of the following pieces of advice is an advocate of the bank lending channel most likely to give to officials in an emerging market economy?

To determine whether a home is affordable, most homebuyers focus on