If the Fed buys U.S. Treasury bills and bonds to finance deficits, this means that the government is financing the deficit by printing money, which will eventually lead to
A) excess aggregate supply.
B) excess aggregate demand.
C) deflation.
D) an appreciation of the dollar.

Question

Quizplus · Accepted Answer

If the Fed buys U.S. Treasury bills and bonds to finance deficits, it increases the money supply, which can lead to inflation and excessive aggregate demand. This is because there is now more money in circulation, driving up prices and increasing demand for goods and services. The increase in demand may eventually lead to inflation if there is not enough supply to meet the demand.

If the Fed Buys U