When the government has a deficit, it can:
A) borrow by issuing debt.
B) engage in intertemporal substitution by issuing debt.
C) print money, although it might not want to.
D) All of these answers are correct.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

When the government has a deficit, it can borrow by issuing debt to finance spending or engage in intertemporal substitution by issuing debt to finance future spending. It can also print money, although this can lead to inflation and is generally not preferred as a solution to a deficit. Therefore, all options (A, B, and C) are correct.

When the Government Has a Deficit, It Can