If government expenditures exceed tax receipts in a developing country, the government is most likely to:
A)cut spending.
B)increase taxes.
C)sell bonds to the central bank.
D)buy bonds from the central bank.

Question

Quizplus · Accepted Answer

When government expenditures exceed tax receipts, a common method to finance the deficit is by selling bonds to the central bank. This increases the money supply and provides the government with the needed funds.

If Government Expenditures Exceed Tax Receipts in a Developing Country