If the federal government runs a budget deficit in order to finance an increase in spending,where do the funds to finance the spending come from?
A)increased personal income taxes
B)additional money printed by the Federal Reserve
C)additional bonds issued by the U.S.Treasury
D)the financial assets of the members of Congress who are legally responsible for the deficit

Question

Quizplus · Accepted Answer

When the federal government runs a budget deficit to finance an increase in spending, the funds to finance the spending come from the additional bonds issued by the U.S. Treasury. The Treasury sells these bonds to investors and uses the proceeds to fund its operations, including the increase in spending. This leads to an increase in the federal debt, as the government must pay interest on these bonds. Option A is not a direct source of funding for the deficit, and option B could potentially lead to inflation. Option D is not a viable option as the personal assets of members of Congress are not sufficient to cover the deficit.

If the Federal Government Runs a Budget Deficit in Order