The Central Bank of the Delta economy has decided to make a purchase of bonds in the market open

Economics Oct 28, 2020

The Central Bank of the Delta economy has decided to make a purchase of bonds in the market open. The economy has a tax system that is made up of autonomous taxes and taxes proportional to income. Select the INCORRECT answer (s): The price of the bonds decreases. O Equilibrium consumption increases as GDP expands. The government deficit remains constant. OR The equilibrium GDP of this economy increases due to the expansion of investment.

Expert Solution

Incorrect answer is option 3- The government deficit remains constant.

Because when the Central bank will purchase the bonds , the debt of the government will change and the deficit will not remain constant.

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