What does the term 'monetary transmission mechanism' refer to?

What does the term 'monetary transmission mechanism' refer to?

Step 1: Understand that 'monetary policy' is how a country's central bank controls the money supply and interest rates.
Step 2: Recognize that when the central bank changes interest rates, it influences how much money people and businesses can borrow.
Step 3: Realize that lower interest rates make borrowing cheaper, encouraging people to spend and businesses to invest.
Step 4: Acknowledge that this increased spending and investment can lead to economic growth.
Step 5: Conversely, higher interest rates make borrowing more expensive, which can slow down spending and investment.
Step 6: The 'monetary transmission mechanism' is the entire process of how these changes in interest rates affect the overall economy.

No concepts available.