A cause of the decline in the velocity of money during the 2007-2009 financial crisis was a result of:

Question

Quizplus · Accepted Answer

The decline in velocity of money during the 2007-2009 financial crisis was mainly due to increased uncertainty, as people and businesses became hesitant to spend or invest. This led to a decrease in the frequency of transactions, which is a key component of the velocity of money. The fiscal stimulus provided by the U.S. government and the lowering of the discount rate by the Fed were intended to boost economic activity, but they were not sufficient to overcome the overarching uncertainty that gripped the economy. The use of unconventional policy tools by the Fed, such as quantitative easing, also had a limited impact on the velocity of money.

A Cause of the Decline in the Velocity of Money