One part of monetizing the debt is for the central bank to ________.
A) conduct an open market purchase
B) conduct an open market sale
C) increasing the overnight rate
D) decreasing the overnight rate

Question

Quizplus · Accepted Answer

Conducting an open market purchase involves the central bank buying government bonds from the market, which increases the money supply in the economy and puts more money into circulation. This is one way for the central bank to monetize the debt, as it increases the amount of funds available to the government without directly raising taxes or issuing new bonds. Conducting an open market sale (option B) would have the opposite effect, as the central bank would be selling government bonds and withdrawing money from circulation, which would not help monetize the debt. Changing the overnight rate (options C and D) can have effects on the economy, but it is not directly related to monetizing the debt.

One Part of Monetizing the Debt Is for the Central