and therefore create a feedback loop. 4.The selling of government bonds is a market determined method to temporarily reduce aggregate demand. a.An entity's "savings" in a US government bond temporarily reduces the demand for goods until the maturity of that bond. b.The net impact to aggregate demand is dependent on the relationship of the rate of interest on the bond and the change of inflation over the life of the bond. i.If inflation is higher than the interest on the bond then the principal and interest will buy fewer goods at maturity and if inflation is lower than the coupon then the principal and interest will buy more goods. spending and taxing influence gdp, etc. but not the resulting deficit per se. selling govt bonds doesn't serve reduce aggregate demand, but to influence interest rates. and interest rates may or may not do much for aggregate demand (I think not for the most part, etc. see other posts on this). When I say "resulting surplus or deficit" I mean the net of spending minus tax receipts. So the net of the two impacts GDP, etc. The way each is written influences how and who it impacts. Correct? Example: If the government decided to issue bonds at such a high interest rate that all government spending, excluding what was needed to pay taxes, was used to buy those bonds, there would be no demand for any other goods (since no one would have any money to buy those goods). Every dollar