Which of the following reduced the demand stimulus effects of monetary policy during the years following the 2008-2009 recession?
A)Failure of the Fed to provide sufficient reserves to the banking system for the extension of new loans.
B)A substantial reduction in the velocity of money resulting from the historically low interest rates.
C)The Fed's high interest rate policy that reduced private investment.
D)Inability of the Fed to gain approval from Congress to purchase assets other than bonds issued by the federal government.

Question

Quizplus · Accepted Answer

The substantial reduction in the velocity of money, due to historically low interest rates, meant that even though there was an increase in the money supply, it did not translate into increased spending and demand as people and businesses were holding onto cash rather than spending or investing it.

Which of the Following Reduced the Demand Stimulus Effects of Monetary