The ways the federal government can finance its expenditures

Question

Quizplus · Accepted Answer

The federal government can finance its expenditures by raising taxes, borrowing, and creating new money. Taxes provide revenue for the government, borrowing allows the government to issue bonds and raise funds from investors, and creating new money involves the Federal Reserve printing more currency. Option A is incorrect because selling gold holdings is not a sustainable long-term solution. Option B is incorrect because it only lists one way (raising and lowering taxes), while in reality, borrowing and creating new money are also options. Option D is incorrect because exporting more than importing does not directly provide revenue for the government. Option E is incorrect because while financing expenditures can lead to an increase in the national debt, it is not necessarily true that all financing methods will always result in a higher national debt.

The Ways the Federal Government Can Finance Its Expenditures