question archive When the government runs a deficit, it will: A
When the government runs a deficit, it will: A
Subject:EconomicsPrice:2.88 Bought3
When the government runs a deficit, it will:
A. buy bonds to finance the deficit.
B. sell bonds to finance the deficit.
C. reduce the money supply to finance the deficit.
D. raise taxes immediately.
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The correct answer to the given question is option B. sell bonds to finance the deficit.
For a given government, a budget deficit is usually financed by means of borrowings. The borrowing may come from financial institutions such as World bank or the central bank or from investors. The government usually issues or sells bonds at a predetermined interest rate to borrow the required amount.
