When a Government Has a Large Budget Deficit,it Must Issue

question 60

Essay

When a government has a large budget deficit,it must issue government bonds to finance the deficit.Explain if it matters for the rate of inflation if the government sells the bonds to the public or sells the bonds to the central bank.

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Definitions:

Disparity

The existence of inequalities or differences between groups, regions, or countries, often in terms of economic, social, or health outcomes.

Transitory Income

Income that is temporary or not expected to continue at the same level in future periods, such as one-time bonuses or inheritances.

Permanent Income

A theory suggesting that people's spending choices are better determined by their long-term average income rather than their current income.

Purchasing Decisions

The choice process by consumers or organizations regarding the identification, comparison, and selection of products or services.