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Americans have recently accumulated record levels of credit card debt. As a result, the risk of...

Americans have recently accumulated record levels of credit card debt. As a result, the risk of bankruptcy has increased significantly for a large segment of the population. Congress decides that it is necessary to ban credit cards to protect the public from such risk. How would such a ban affect the velocity of money? Explain your answer.

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Answer #1

Using credit cards on large number can affect the economy badly as banks will have less money and also hardly they can provide any loan to any other sector.

If credit cards are ban then the velocity of money in an economy will rise then the banks can provide loans easily with a lower interest rate.

To protect the economy to be in debts government had to take this step of bannig, so that the money flow in the economy will be in much better condition.

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