Final answer:
Tax Anticipation Notes (TANS) and Revenue Anticipation Notes (RANs) are short-term borrowing instruments used by government entities to finance their activities until they receive their tax or non-tax revenues.
Step-by-step explanation:
Tax Anticipation Notes (TANS) are short-term borrowing instruments used by government entities to finance their activities until they receive their tax revenues. These notes are typically issued by states or municipalities and are backed by the anticipated tax receipts. TANS are usually issued at a discount and mature within one year.
Revenue Anticipation Notes (RANs) are also short-term borrowing instruments used by government entities but instead, they are backed by anticipated revenue from sources other than taxes, such as grants, fees, or bond proceeds. RANs help bridge the gap between the timing of expenses and the actual receipt of revenue.
Both TANS and RANs help governments manage their cash flow by providing them with immediate funds while they wait for their anticipated tax or non-tax revenue.