If the deficit is financed by selling bonds to the ________,the money supply will ________,causing aggregate demand to ________.
A)public;rise;increase
B)public;fall;decrease
C)central bank;rise;increase
D)central bank;fall;decrease

Question

Quizplus · Accepted Answer

If the central bank finances the deficit by purchasing bonds, it increases the money supply, causing aggregate demand to increase. If the public purchases bonds to finance the deficit, the money supply may rise or fall depending on whether the public uses their savings or borrows money to purchase the bonds. However, typically the central bank is the primary purchaser of government bonds in most countries.

If the Deficit Is Financed by Selling Bonds to the ________,The