The decisions on the part of the government to increase spending by $5 billion will have the largest impact on aggregate demand when the spending is financed by the sale of bonds to
A)the member banks.
B)the public.
C)the Fed.
D)foreigners.

Question

Quizplus · Accepted Answer

When the government finances increased spending by selling bonds to the Federal Reserve (the Fed), it effectively introduces new money into the economy, leading to a direct increase in aggregate demand without immediately withdrawing an equivalent amount from the private sector, as would be the case with the other options. This process can lead to a more significant impact on aggregate demand due to the introduction of new money and the potential for a multiplier effect.

The Decisions on the Part of the Government to Increase