Suppose the government has a $180 billion budget deficit. If the government creates $95 billion of new money to finance this deficit and finances the rest by borrowing, the amount borrowed from the public will be
A) $85 billion.
B) $95 billion.
C) $180 billion.
D) $275 billion.

Question

Quizplus · Accepted Answer

If the government creates $95 billion of new money, then the amount financed by borrowing will be:

$180 billion - $95 billion = $85 billion

Therefore, the amount borrowed from the public will be $85 billion.

Suppose the Government Has a $180 Billion Budget Deficit