Transmission Mechanism -

: Affects the willingness of banks to lend; higher rates can reduce a borrower's net worth, making them appear riskier to lenders.

In economics, this describes how a central bank's policy decisions (like changing interest rates) travel through financial markets to impact businesses and households. Key Channels of Impact transmission mechanism

: Lower rates often boost the value of stocks and housing, increasing household wealth and spending power. : Affects the willingness of banks to lend;