Increases in interest rates
A) reduce borrowers' net worth.
B) reduce lenders' net worth.
C) increase the present value of borrowers' assets.
D) raise the cost to businesses of internal funding.
The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect
A) the portfolio decisions of households.
B) the portfolio decisions of businesses.
C) borrowers' net worth.
D) lenders' net worth.
Changes in net worth and liquidity may significantly affect the volume of lending and economic activity according to the
A) interest rate channel.
B) balance sheet channel.
C) money channel.
D) bank lending channel.
Monetary policy can have substantial effects on the economy even when nominal interest rates are very low
A) since real rates are what affect borrowing and spending decisions.
B) by improving borrower and bank balance sheets.
C) by reducing transactions costs.
D) only when the policy is substantial.