If the Fed's monetary policy causes a substantial decrease in interest rates, what is the most likely impact on velocity?

Question

Quizplus · Accepted Answer

According to the quantity theory of money, velocity is inversely related to the nominal interest rate. When interest rates decrease, people are less incentivized to hold onto money, and there is an increase in spending and borrowing. This leads to a decrease in velocity, as money is changing hands more frequently to facilitate these transactions.

If the Fed's Monetary Policy Causes a Substantial Decrease in Interest