A government's budget deficit is equal to

Question

Quizplus · Accepted Answer

The budget deficit is the difference between government spending and revenue. When the government spends more than it takes in, it must borrow the difference. This borrowing is done by issuing bonds. The change in the value of bonds issued is therefore equal to the change in the government's debt. The change in the money supply is equal to the change in the amount of money in circulation. When the government spends more than it takes in, it must increase the money supply in order to pay for its spending. Therefore, the budget deficit is equal to the change in the value of bonds issued plus the change in the money supply.

A Government's Budget Deficit Is Equal to