TRANSMISSION MECHANISM Meaning and
Definition
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Transmission Mechanism refers to the process or pathway through which changes in one economic variable, such as interest rates or government policies, impact other variables, such as inflation, output, or employment in an economy. It is a concept used in economics to explain how changes or shocks in one part of the economy can have ripple effects or spillovers on other sectors or variables.
In the context of monetary policy, the transmission mechanism describes how changes in the central bank's policies, particularly changes in interest rates, affect various economic agents and sectors. For example, when the central bank increases interest rates, banks may raise their lending rates, impacting borrowing costs for individuals and businesses. Higher borrowing costs can then reduce investment and consumption expenditure, leading to a decline in output and employment. Similarly, changes in interest rates can influence exchange rates, asset prices, and expectations, all of which can further affect various sectors of the economy.
Transmission mechanisms can also be observed in other areas of economic policy, such as fiscal policy. When the government implements changes in its expenditure or taxation policies, it affects the income, spending patterns, and behavior of households and firms, thereby influencing various sectors and economic indicators.
Overall, the transmission mechanism is a theoretical framework that helps economists understand how changes or shocks in one part of the economy impact other sectors or variables, enabling them to analyze the consequences and interconnectedness of economic activities.
Common Misspellings for TRANSMISSION MECHANISM
- rransmission mechanism
- fransmission mechanism
- gransmission mechanism
- yransmission mechanism
- 6ransmission mechanism
- 5ransmission mechanism
- teansmission mechanism
- tdansmission mechanism
- tfansmission mechanism
- ttansmission mechanism
- t5ansmission mechanism
- t4ansmission mechanism
- trznsmission mechanism
- trsnsmission mechanism
- trwnsmission mechanism
- trqnsmission mechanism
- trabsmission mechanism
- tramsmission mechanism
- trajsmission mechanism
- trahsmission mechanism
Etymology of TRANSMISSION MECHANISM
The word "transmission" originates from the Latin word "transmissio", which is derived from the verb "transmittere". "Transmittere" is composed of two Latin roots: "trans", meaning "across" or "through", and "mittere", meaning "to send". Therefore, "transmission" essentially means the act of sending something across or through.
On the other hand, "mechanism" comes from the Greek word "mekhanē", which refers to a tool or a device. It was later adopted into Latin as "mechanismus" before being integrated into English. In broad terms, "mechanism" denotes a system or method designed to perform a specific task or function.
When combined, "transmission mechanism" refers to the system or process by which something is sent or transferred across or through a specific channel or medium.
Similar spelling words for TRANSMISSION MECHANISM
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