Which of the following reduced the effectiveness of the Fed's low interest rate policy during the aftermath of the 2008-2009 recession?
A) The heavy indebtedness of households.
B) The reduction in the earnings derived from savings accounts, certificates of deposits, and other forms of savings used by many Americans.
C) The increased fear of inflation fueled by the Fed's expansionary monetary policy.
D) All of the above.

Question

Which of the following reduced the effectiveness of the Fed's low interest rate policy during  the aftermath  of the 2008-2009 recession?
A) The heavy indebtedness of households.
B) The reduction in the earnings derived from savings accounts, certificates of deposits, and other forms of savings used by many Americans.
C) The increased fear of inflation fueled by the Fed's expansionary monetary policy.
D) All of the above.

Quizplus · Accepted Answer

All of the given factors reduced the effectiveness of the Fed's low-interest rate policy during the aftermath of the 2008-2009 recession. The heavy indebtedness of households constrained their ability to take advantage of low-interest rates to borrow and spend. The reduction in earnings from savings accounts and other saving instruments limited the incentive for savers to spend more. Finally, the increased fear of inflation fueled by the Fed's expansionary monetary policy reduced the confidence of firms and households in the low-interest-rate policy as a sustainable strategy for growth.

Which of the Following Reduced the Effectiveness of the Fed's