Monetizing the budget deficit
A) leads to increases in the money supply.
B) creates a full-employment deficit that exceeds the actual deficit.
C) occurs when the Treasury sells bonds to businesses.
D) helps stabilize the economy.

Question

Quizplus · Accepted Answer

Monetizing the budget deficit involves the central bank buying government bonds, which increases the money supply. This can lead to inflation if not managed properly. While it can help stabilize the economy in the short-term, it is not a sustainable solution for managing budget deficits.

Monetizing the Budget Deficit