question archive If, in a particular year, the government ran a budget deficit of $200 billion, and the private sector's holdings of government securities increased by $100 billion, what is the likely dollar increase in the monetary base resulting from the budget deficit?
If, in a particular year, the government ran a budget deficit of $200 billion, and the private sector's holdings of government securities increased by $100 billion, what is the likely dollar increase in the monetary base resulting from the budget deficit?
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If, in a particular year, the government ran a budget deficit of $200 billion, and the private sector's holdings of government securities increased by $100 billion, what is the likely dollar increase in the monetary base resulting from the budget deficit?
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The monetary base increases by $100 billion.
Budget deficit $200 billion
Private sector holdings of G securities increase by $100 billion.
The dollar increase in monetary base=(200-100)
=$100 billion
The dollar increase in the monetary base is $100 billion. This is because the private sector holdings on government securities offset the budget deficit by $100 billion.
