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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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.