Table 36-2

-If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of
A)T over G.
B)C over T plus G.
C)investment by American businesses and individuals.
D)S over I by American businesses and individuals, or by borrowing from foreigners.

Question

Table 36-2
​ 
-If the U.S.government runs a budget deficit (G − T), that deficit must be financed by an excess of
A)T over G. 
B)C over T plus G. 
C)investment by American businesses and individuals. 
D)S over I by American businesses and individuals, or by borrowing from foreigners.

Quizplus · Accepted Answer

If the U.S. government runs a budget deficit (G − T), the deficit must be financed either by American businesses and individuals investing more than they save (S > I) or by borrowing from foreigners. This is because a budget deficit indicates that the government is spending more than it is collecting in taxes, leading to a shortfall of funds that must be made up in some way. American consumers and businesses may increase their investment and savings to help finance the deficit, but if this is not enough, the government may need to borrow from foreign entities to cover its expenses. Therefore, option D is the best choice.

Table 36-2 ​

Table 36-2