When a government has a budget deficit, it must issue (sell) government bonds to finance the deficit
Does it matter for the rate of inflation if the government sells the government bonds to the public or sells the government bonds to the central bank? Explain why it does or does not matter.
It matters greatly. When the government sells the bonds to the public the money supply does not change, but when they sell the bonds to the central bank the money supply increases. If there are large budget deficits, the money supply will increase substantially when the central bank buys government bonds. Using the quantity theory of money, the increase in money supply from the purchase of the bonds by the central bank will increase the inflation rate.
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In 2014, output per capita in the United States was approximately equal to
A) $15,500. B) $25,800. C) $43,800. D) $54,592.
Economic growth in less-developed countries comes at the cost of
a. higher taxes b. lower current consumption c. lower taxes d. lower government spending e. lower future consumption