The Fed has generally not followed a philosophy of increasing excess reserves to finance government deficits.

Question

Quizplus · Accepted Answer

The Federal Reserve typically focuses on controlling inflation and managing unemployment rates rather than directly financing government deficits by increasing excess reserves. Financing government deficits through excess reserves would be more akin to monetizing the debt, a strategy not generally pursued by the Fed as it can lead to inflationary pressures.

The Fed Has Generally Not Followed a Philosophy of Increasing