Methods of financing government spending are described by an expression called the government budget constraint,which states the following
A)the government budget deficit must equal the sum of the change in the monetary base and the change in government bonds held by the public.
B)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the public.
C)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the Fed.
D)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the Treasury.

Question

Quizplus · Accepted Answer

The government budget constraint indicates that the government budget deficit is financed either by creating new money (increasing the monetary base) or by issuing new bonds to the public. Thus, the deficit equals the sum of these two changes.

Methods of Financing Government Spending Are Described by an Expression