If a deficit is financed by issuing new money, the:
A)government is using its accumulated surplus to issue the new money.
B)government will be competing with private borrowers for funds.
C)increased demand for funds will drive up the interest rate.
D)crowding-out of investment can probably be avoided.

Question

Quizplus · Accepted Answer

Issuing new money to finance a deficit increases the money supply, which can help avoid crowding out by not raising interest rates, unlike borrowing from the private sector.

If a Deficit Is Financed by Issuing New Money, The