Monetizing the federal debt:
A) intensifies the crowding out problem.
B) requires that the Federal Reserve follow a tight money policy.
C) occurs whenever the U.S. Treasury prints and circulates coins and paper money.
D) results in a larger volume of loans and a lower interest rate than would occur were the debt not monetized.

Question

Quizplus · Accepted Answer

Monetizing the federal debt involves the central bank (e.g., the Federal Reserve in the U.S.) buying government bonds, which increases the money supply. This typically leads to lower interest rates and a larger volume of loans, as more money is available for lending.

Monetizing the Federal Debt