Money supply of the treasury using the fiscal surplus

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In 2000, the federal debt was being paid down because the federal budget was in surplus. What is the impact on the money supply of the Treasury using the fiscal surplus (excess tax receipts) to buy back bonds relative to the Fed using open market purchases to buy bonds? A) When the Treasury buys back bonds, there is a decrease in the money supply. When the Fed buys bonds in open market operations, there is an increase in reserves and thus an increase in the money supply. B) When the Treasury buys back bonds, there is a decrease in the money supply. When the Fed buys bonds in open market operations, there is a decrease in reserves and thus a decrease in the money supply. C) When the Treasury buys back bonds, there is no change in the money supply. When the Fed buys bonds in the open market operations, there is an increase in reserves and thus an increase in the money supply.

Reference no: EM131239290

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