Why didn't the Fed's quantitative easing policies exert a stronger impact on aggregate demand and lead to a more rapid recovery during 2010-2012?
A) The low interest rates accompanying the policy failed to increase stock prices.
B) Even though the Fed made additional reserves available to the banking system, the policy did not result in lower interest rates.
C) The velocity of money increased, partially offsetting the impact of the Fed's low interest rate policy.
D) The earnings of senior citizens and others from money market accounts, saving deposits, and other forms of savings fell, reducing their incentive to spend and thereby increasing aggregate demand.

Question

Quizplus · Accepted Answer

The reduction in earnings from savings due to low interest rates decreased the spending power of senior citizens and others relying on interest income, which in turn reduced their incentive to spend and dampened the impact on aggregate demand.

Why Didn't the Fed's Quantitative Easing Policies Exert a Stronger