Money creation to support spending in the aftermath of the financial crisis was ineffective because:
A) there was not enough of it.
B) banks, individuals, and firms used the additional liquidity to rebuild wealth by paying down debt rather than spending.
C) much of the money leaked out to overseas deposits.
D) spending was growing too fast and people were using money substitutes.

Question

Quizplus · Accepted Answer

Money creation was not effective because banks, individuals, and firms used the additional liquidity to pay down debt instead of spending. This led to a decrease in the velocity of money and reduced the effectiveness of the monetary stimulus. Additionally, much of the money created did not stay within the domestic economy but leaked out to overseas deposits.

Money Creation to Support Spending in the Aftermath of the Financial