Final answer:
True, governments can borrow short-term funds through tax anticipation notes payable when they have a temporary cash shortfall and expect to collect taxes during the fiscal year.
Step-by-step explanation:
True, governments that are temporarily short of cash but that have levied taxes expected to be collectible during the fiscal year are generally able to borrow funds through the issuance of short-term notes known as tax anticipation notes payable. These financial instruments are a customary means for governments to manage cash flow, particularly when they face a temporary shortfall in revenue due to cyclical or unexpected factors. By leveraging the expected tax revenue, governments can continue to operate and provide services without interruption.
It is important to understand that when a government spends more than it collects in taxes, it runs a budget deficit. In such situations, the government becomes a borrower of financial capital in order to cover its expenditures. The issuance of treasury bonds, notes, and particularly tax anticipation notes payable, represents how governments borrow to fill the gap between spending and tax revenue in the short term.