When the Government Finances a Deficit by Selling Its Securities

question 1

Multiple Choice

When the government finances a deficit by selling its securities to the Fed

• A) it will have a smaller inflationary impact than if it sells securities to households and firms.
• B) interest rates will rise by greater amounts than if these securities are sold to households and firms.
• C) it is spared having to pay interest on the borrowed money, reducing borrowing costs.
• D) there will be increases in the money supply, aggregate demand, and price level.
• E) the value of these securities are not counted as part of the national debt because they are held by a government agency.

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Definitions:

Apical Meristem

Regions of rapidly dividing cells in plants located at the tips of roots and shoots, responsible for primary growth and elongation.

Terminal Bud

Bud that develops at the apex of a shoot.

Rhizomes

Underground plant stems capable of producing the shoot and root systems of a new plant, contributing to asexual reproduction and the spread of the plant.

Papery Leaves

Leaves characterized by a thin, dry, and delicate texture, often found on plants in dry environments.