Large federal deficits may be funded by the issuance of new debt securities by the Treasury. The effect of these Treasury borrowings on financial market conditions and the economy depends on the source of borrowed funds.

Question

Quizplus · Accepted Answer

When the Treasury issues new debt securities to fund large federal deficits, it borrows from investors, which can affect interest rates, investment in other areas, and overall economic conditions depending on whether these funds are sourced domestically or internationally, and on the current state of the economy.

Large Federal Deficits May Be Funded by the Issuance of New