Exam 25: Transmission Mechanisms of Monetary Policy

Due to asymmetric information in credit markets,monetary policy may affect economic activity through the balance sheet channel,where an increase in the money supply

Real business cycle theorists are critical of monetarist reduced-form evidence because they believe

Real business cycle theory states that the most important cause of business cycles is

________ examines whether one variable has an effect on another by simply looking directly at the relationship between the two variables.

From the earlier 1990s until 2012,the Japanese monetary was ________ and stock and real estate prices were ________.

Explain the traditional interest-rate channel for expansionary monetary policy. Explain how a tight monetary policy affects the economy through this channel.

A contractionary monetary policy raises the real interest rate,causing the domestic currency to ________,thereby ________ net exports.

According to Tobin's q theory,if q is ________,new plant and equipment capital is ________ relative to the market value of business firms,so companies can buy a lot of new investment goods with only a ________ issue of stock.

If a contractionary monetary policy lowers the price level by more than expected,it raises the real value of consumer debt. This reduces consumer expenditure through

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period

A rise in stock prices ________ the net worth of firms and so leads to ________ investment spending because of the reduction in moral hazard.

A criticism of the monetarist autonomous spending variable is that

An expansionary monetary policy raises firms' cash flows by ________ interest rates.

A contractionary monetary policy decreases net exports by ________ interest rates and ________ the value of the dollar.

The channels through which monetary policy affects economic activity are called the ________ of monetary policy.

According to the household liquidity effect,higher stock prices lead to increased consumption expenditures because consumers

Discuss three channels by which monetary policy affects stock prices and aggregate spending.

According to the household liquidity effect,an expansionary monetary policy causes a ________ in the value of households' financial assets,causing consumer durable expenditure to ________.

According to Tobin's q theory,________ policy can affect ________ spending through its effect on the prices of common stock.

Franco Modigliani has found that an expansionary monetary policy can cause stock market prices to ________ and consumption to ________.