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Question

The government debt is monetized when the ______.

Treasury mints new currency in order to buy Treasury bills back

Fed conducts open-market purchases (I AM THINKING THIS IS THE RIGHT ANSWER)

Fed transfers part of its financial reserves to the Treasury, who in turn buys Treasury bills back

Fed sells Treasury bills in the bond market

Answer 1

Fed sells Treasury bills in the bond market

http://economistsview.typepad.com/econom...

If Fed conducts open-market purchases then it purchases bonds - so must pay money and it's opposite to initial goal of getting more. To monetize debt it need get money - so to sell bonds (borrow money) and receive money for bonds.

Answer 2

The government debt is monetized when the ______.

Treasury mints new currency in order to buy Treasury bills back

[Paying off government debt by printing more money: .Debt monetization occurs when a nation's central bank (e.g. the Federal Reserve in the United States) buys government bonds,  If a government's expenses exceed its tax revenue, debt monetization prevents the government from taking capital out of the private market. Since there is a limited amount of capital available in the market, there will be less available to fund business growth if the government takes a substantial portion].