Question

Government usually

A)

borrows funds directly from financial institutions.

B)

maintains permanent deposits with financial institutions.

C)

is a net supplier of funds.

D)

is a net demander of funds.

Answer 1

The correct answer is D) is a net demander of funds. When the federal government runs a budget deficit, it needs to borrow money from investors by selling Treasury bonds.

Step-by-step explanation:

The correct answer is D) is a net demander of funds. When the federal government runs a budget deficit, it needs to borrow money from investors by selling Treasury bonds. This means that the government is a demander of financial capital, or a borrower, rather than a supplier of funds. The government borrows funds to finance its spending when it spends more than it collects in taxes.