Suppose the U.S.Treasury issues and sells $100 million of U.S.government securities (bonds)to the public.How will this affect the money supply and the national debt?
A)The money supply will increase;the national debt will decrease.
B)The money supply will decrease;the national debt will increase.
C)The money supply will be unaffected;the national debt will increase.
D)The money supply will be unaffected;the national debt will decrease.

Question

Quizplus · Accepted Answer

When the U.S. Treasury sells government securities, it borrows money from the public, increasing the national debt. The money supply is unaffected because the transaction is between the Treasury and the public, not involving the Federal Reserve's monetary base.