Monetizing the debt occurs when the Federal Reserve:
A) increases the money supply to accommodate federal government borrowing.
B) decreases the money supply to accommodate federal government borrowing.
C) reduces the discount rate so the federal government can borrow at lower interest rates.
D) increases the discount rate to discourage private borrowing so the federal government can borrow.

Question

Quizplus · Accepted Answer

Monetizing the debt involves the Federal Reserve buying government bonds or securities, effectively increasing the money supply to finance government borrowing without the need to directly raise funds from the public through taxes or borrowing from the market. This process can lead to an increase in the overall money supply.

Monetizing the Debt Occurs When the Federal Reserve