Question

Federal government spending far exceeds federal tax revenues. How does the federal government make up the difference? It borrows the money (in the form of government bonds). It sells assets it owns, such as land and buildings. It borrows the money (in the form of corporate loans). It charges for its services.

Answer 1

To make up for a budget deficit, the federal government borrows money by selling Treasury bonds, notes, and bills, essentially borrowing from the public and foreigners with a promise to repay with interest.

Step-by-step explanation:

When the federal government spends more money than it receives in tax revenues, it must find ways to cover the budget shortfall. The primary method the government uses to make up the difference is borrowing. The government does this by selling securities such as Treasury bonds, notes, and bills. This is in essence borrowing from the public and from foreign entities, with the promise to repay with interest in the future.

For example, a notable period of budget deficit was in 2009, where the government spent $1.4 trillion more than its tax revenues, signifying a significant budget deficit relative to the U.S. GDP at the time. It's worth mentioning that the U.S. government has experienced budget surpluses, such as from 1998 to 2001, but has mainly run deficits in other years, thereby needing to borrow funds.