Which of the following is NOT true of the interest rate channel?
A) bank loans play no special role.
B) the Fed changes the real interest rate which affects the components of aggregate expenditures.
C) borrowers are indifferent as to how and from whom they raise funds.
D) alternative sources of funds are not substitutes for each other.

Question

Quizplus · Accepted Answer

The interest rate channel assumes that alternative sources of funds can be substitutes for each other, meaning that if one source becomes more expensive, borrowers can switch to another.

Which of the Following Is NOT True of the Interest