Suppose the government has a $1.2 trillion budget deficit. If the government borrows $1.2 trillion to finance this deficit and finances the rest by printing money, the amount of new money created will be

Question

Quizplus · Accepted Answer

Since the government borrows the full amount of the deficit ($1.2 trillion), it does not need to print any new money to finance the deficit, resulting in $0 of new money created.

Suppose the Government Has a $1