Selling Bonds vs. Printing New Money to Cover a Defecit
4) Suppose the government proposes to cut taxes while
maintaining the current level of government expenditures. To finance this
deficit, it may either
a) sell bonds to the public, or, b) print new money (via
Federal reserve cooperation).
-What are the likely effects of each of these alternatives
on each of the following?
a) interest rates
b) consumer spending
c) business investment
d)aggregate demand.
Would Keynesians , monetarists, and supply-siders give the
same answers?
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