When the Treasury borrows from the non-bank public and makes an expenditure of an equal amount, the money supply
A) rises by a multiple of the expenditure.
B) rises by an amount equal to the expenditure.
C) rises by an amount less than the expenditure.
D) is unaffected.

Question

Quizplus · Accepted Answer

When the Treasury borrows from the non-bank public and spends an equal amount, the money simply changes hands without affecting the total money supply. The borrowed funds are spent, circulating back into the economy, but the overall supply of money remains unchanged.

When the Treasury Borrows from the Non-Bank Public and Makes