When the Treasury Department Borrows from the Public to Finance

question 16

Multiple Choice

When the Treasury Department borrows from the public to finance the government's purchases of goods and services and the Fed buys the debt back from the public in the form of Treasury bills, it is known as:

• A) moral suasion.
• B) money illusion.
• C) structuring the deficit.
• D) monetizing the debt.

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Definitions:

Divisor

A number that divides into another number, typically referred to in the context of indices calculation in finance.

Money Market Investment

Short-term financial instruments with high liquidity, often used for cash management by investors and companies.

Bankers' Acceptance

A short-term financial instrument issued by a company that is guaranteed by a commercial bank.

Treasury Note

A type of U.S. government debt security with a fixed interest rate and maturity between two to ten years.