Which of the following reduced the demand stimulus effects of the Fed's low interest rate policy pursued during, and after, the financial crisis of 2008-2009?
A) Declining stock prices during 2010-2012.
B) An increase in the velocity of money.
C) A reduction in earnings derived from money market accounts, saving deposits, and similar saving instruments.
D) A sharp increase in the rate of inflation during 2009-2012.

Question

Quizplus · Accepted Answer

The reduction in earnings from saving instruments, such as money market accounts and saving deposits, would discourage individuals from saving and reduce the demand for loans, thus reducing the effectiveness of the Fed's low interest rate policy. The other options may have other effects on the economy, but do not directly affect the demand stimulus effects of the Fed's policy.

Which of the Following Reduced the Demand Stimulus Effects of the Fed's