If the Treasury prints currency to finance an expenditure, the impact on the money supply is similar to when the Treasury borrows from the
A) banking system when it is fully loaned-up.
B) banking system when it has excess reserves.
C) non-bank public.
D) Federal Reserve.

Question

Quizplus · Accepted Answer

When the Treasury prints currency to finance an expenditure, it directly increases the money supply, similar to when it borrows from the Federal Reserve. The Federal Reserve can create money to buy Treasury securities, directly increasing the money supply, akin to printing money.

If the Treasury Prints Currency to Finance an Expenditure, the Impact