Question

The Federal Reserve is buying most U.S. debt, and the only reason it can do that is because it can create money to lend.

a. true
b. false

Answer 1

The Federal Reserve is able to buy the majority of U.S. debt by creating money.

Step-by-step explanation:

The statement is true. The Federal Reserve is able to buy the majority of U.S. debt by creating money. As a central bank, the Federal Reserve has the authority to create money out of thin air or through electronic transactions. When the Federal Reserve wants to purchase bonds, it can simply create new money and use that money to buy the bonds from banks or other financial institutions.