Question

This method of financing government spending is frequently called printing money because high-powered money (the monetary base) is created in the process. Question 35 options: A) financing government spending by selling bonds to the public, which pays for the bonds with currency B) financing government spending by selling bonds to the public, which pays for the bonds with checks C) financing government spending through a Treasury sale of bonds that are then purchased by the Fed D) financing government spending with taxes

Answer 1

Answer:

C) financing government spending through a Treasury sale of bonds that are then purchased by the Fed

Explanation:

The Fed is the only entity that can expand or contract the country's monetary base, and it does it with open market operations. In this case, the Fed is injecting money into the financial system and expanding the monetary base by purchasing treasury bonds, which is basically like my right hand lends money to my left hand, that is why it is called printing money.