Why Didn't the Fed's Quantitative Easing Policies Exert a Stronger

question 88

Multiple Choice

Why didn't the Fed's quantitative easing policies exert a stronger impact on aggregate demand and lead to a more rapid recovery during 2010-2012?

• A) The low interest rates accompanying the policy failed to increase stock prices.
• B) Even though the Fed made additional reserves available to the banking system, the policy did not result in lower interest rates.
• C) The velocity of money increased, partially offsetting the impact of the Fed's low interest rate policy.
• D) The earnings of senior citizens and others from money market accounts, saving deposits, and other forms of savings fell, reducing their incentive to spend and thereby increasing aggregate demand.

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