Central banks in developing countries (LDCs) generally have less effect on expenditure and output than in developed countries because of: I. an externally dependent banking system; II. a poorly developed securities market; III. a low share of demand deposits in the money supply; IV. investment and employment being relatively insensitive to monetary policy. Which apply?
Correct answer B. All of I, II, III and IV
Explanation
Each factor weakens monetary transmission in LDCs: foreign-linked banks, thin securities markets, heavy reliance on currency rather than deposits, and investment that responds little to interest rates.
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