The Fed monetizes the debt when it:
A) prints money and buys government debt from the public.
B) sells bonds.
C) decreases the money supply.
D) targets interest rates.

Question

Quizplus · Accepted Answer

Monetizing the debt refers to the process of the central bank, in this case the Fed, printing money and using that money to buy government debt from the public. This increases the money supply in the economy and is often used as a way to finance government spending when other forms of financing, such as borrowing from private investors, are not available or desirable. Selling bonds, decreasing the money supply, and targeting interest rates are not examples of monetizing the debt.

The Fed Monetizes the Debt When It