Why might the Fed decide to monetize the deficit?
A)To keep inflation low
B)To reduce the structural deficit
C)To reduce the budget deficit
D)To keep interest rates low

Question

Quizplus · Accepted Answer

The Fed might decide to monetize the deficit to keep interest rates low, as printing money and buying U.S. Treasuries helps to increase demand for them and reduce their yields. This in turn helps to keep borrowing costs low for businesses and individuals, and could stimulate economic growth. However, it can also lead to inflation and a decrease in the value of the dollar over time.

Why Might the Fed Decide to Monetize the Deficit