Depository institutions (DIs)play an important role in the transmission of monetary policy from the Federal Reserve to the rest of the economy because
A)loans to corporations are part of the money supply.
B)bank and thrift loans are tightly regulated.
C)U.S. DIs compete with foreign financial institutions.
D)DI deposits are a major portion of the money supply.
E)thrifts provide a large amount of credit to finance residential real estate.

Question

Quizplus · Accepted Answer

Depository institutions (DIs) play an important role in the transmission of monetary policy from the Federal Reserve to the rest of the economy because DI deposits are a major portion of the money supply. As part of the transmission mechanism, changes in the Federal Reserve's monetary policy can affect the ability of DIs to create deposits and extend credit, influencing spending, investment, and ultimately, the overall health of the economy.

Depository Institutions (DIs)play an Important Role in the Transmission of Monetary