Question

To make bond purchases, the Fed gets the money __________. Select the correct answer below: exclusively from proceeds it has received from selling bonds in the past

Answer 1

Answer: by creating it

Explanation:

Here are the options:

a. from proceeds it has received from selling bonds in the past.

b. from dues paid to it by member banks.

c. by creating it.

d. from the government.

During recession, the government used the expansionary policies in order to improve and stimulate the economy. Buying bonds by the government is a way of increasing money supply in the economy.

To achieve this, the government simply has to create it which can simply be done by printing the currency.