Which of the following statements is correct?
A) Because in practice few borrowers are bank-dependent, the bank lending channel is of little real-world importance.
B) In the interest rate channel, an expansionary monetary policy may cause a leftward shift in the AD curve.
C) In the bank lending channel, an expansionary monetary policy can increase output in the short run even if it does not result in a decrease in the real interest rate.
D) In the interest rate channel, an expansionary monetary policy affects spending but not output.

Question

Quizplus · Accepted Answer

In the bank lending channel, an expansionary monetary policy can indeed increase output in the short run by increasing the amount of funds banks have available to lend, even if it does not lead to a decrease in the real interest rate. This can stimulate investment and consumption, leading to an increase in output.

Which of the Following Statements Is Correct