27. Which of the following statements is correct? A. The Treasury bills that are

Question

27. Which of the following statements is correct? A. The Treasury bills that are purchased by the Fed are not part of our national debt. B. The national debt is equal to the dollar amount of outstanding Treasury bills and bonds. C. The Treasury must sell bills in the amount of the deficit and hence enters on the demand side of the bond market. D. The Treasury must buy bills in the amount of the deficit and hence enters on the demand side of the bond market. E. When the Treasury sells bonds, the supply (of bonds) increases and this puts downward pressure on bond prices and in turn downward pressure on interest rates.

Explanation / Answer

The correct statetment is option E. When the Treasury sells bonds, the supply (of bonds) increases and this puts downward pressure on bond prices and in turn downward pressure on interest rates.

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