Which of the following is the most likely way a government will finance deficit spending?

Choose 1 answer:
(A) Print money
(B) Borrowing
(c) Decrease the discount rate
(D) Buy bonds
(E) Increase public saving

Question

Which of the following is the most likely way a government will finance deficit spending?

Choose 1 answer:
(A) Print money
(B) Borrowing
(c) Decrease the discount rate
(D) Buy bonds
(E) Increase public saving

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Identify the most common methods governments use to finance deficit spending: printing money, borrowing, decreasing the discount rate, buying bonds, and increasing public saving. ‖ ‖ step 2 ⋮ Evaluate the options in the context of typical government fiscal policy. Printing money can lead to inflation, decreasing the discount rate is a monetary policy tool, buying bonds is a monetary policy action, and increasing public saving is not a direct method of financing deficit spending. ‖ ‖ step 3 ⋮ Determine that borrowing is the most direct and common method for a government to finance deficit spending, as it involves obtaining funds directly to cover the shortfall between expenditures and revenues. ‖ ∻Answer∻ ***B*** ∻Key Concept∻ ⚹Government borrowing to finance deficit spending⚹ ∻Explanation∻ ⚹Borrowing is the most direct method for a government to obtain the necessary funds to cover deficit spending, typically through the issuance of government bonds.⚹◊What is the probability of randomly selecting the correct answer to the multiple-choice question presented in the image?⍭ Generate me a similar question◊

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