Government debt is monetized when:

Question

Quizplus · Accepted Answer

Monetization of government debt refers to the process of the central bank printing money to buy government securities. In this case, the Bank of Canada conducts open-market purchases, which involves buying Treasury bills in the secondary market using newly created money. This increases the money supply in the economy and can lead to inflation. Chartered banks buying newly issued Treasury bills (A) and the Bank of Canada selling Treasury bills in the bond market (D) do not involve direct monetization of government debt. The transfer of financial reserves from the Bank of Canada to the Parliamentary Budget Office to buy Treasury bills back (C) is not a typical method of debt monetization.

Government Debt Is Monetized When