Suppose the Fed purchases $100 million of U.S. government securities from the public. How will this affect the money supply and the national debt?

Question

Quizplus · Accepted Answer

When the Fed purchases government securities from the public, it pays for them with newly created money. This injection of money into the economy increases the money supply. However, this does not have an immediate effect on the national debt. The national debt is the total amount of money owed by the federal government to its creditors, which include both individuals and institutions inside and outside of the United States. The purchase of government securities by the Fed does not directly impact the amount of outstanding debt owed by the government.

Suppose the Fed Purchases $100 Million of U