If the government finances its spending by selling bonds to the central bank,the monetary base will ________ and the money supply will ________.

Question

Quizplus · Accepted Answer

When the government sells bonds to the central bank, the central bank pays for these bonds by creating new reserves, which increases the monetary base. Banks can then use these reserves to create more loans, which increases the money supply.

If the Government Finances Its Spending by Selling Bonds to the Central