Which of the following is NOT a transmission mechanism?
A) time bunching
B) intertemporal substitution
C) reversible investments
D) labor adjustment costs

Question

Quizplus · Accepted Answer

Reversible investments are not considered a transmission mechanism in the context of economic theory. Transmission mechanisms refer to the ways in which monetary policy decisions are passed on through the economy, affecting variables like investment, consumption, and labor. Time bunching, intertemporal substitution, and labor adjustment costs are all mechanisms that can explain how economic agents respond to changes in economic conditions or policies. Reversible investments, on the other hand, pertain to the flexibility of reallocating capital without significant costs, which doesn't directly act as a mechanism transmitting economic policy effects.

Which of the Following Is NOT a Transmission Mechanism