The government budget constraint tells us that to the extent that government expenditures are not financed by tax collection, the public ends up holding ________ government bonds and ________ money.

Question

Quizplus · Accepted Answer

When government expenditures exceed tax revenues, the government borrows by issuing bonds, leading to the public holding more bonds. Additionally, if the government finances its deficit by printing money, the public also ends up holding more money.

The Government Budget Constraint Tells Us That to the Extent