Homework Answers
Ans: C. Selling bonds when there is a budget deficits. (Option 4)
When there is a budget deficit in a particular country, it means it spends more than it earns. So, te nation must take out loans to fund this spending. This usually happens by selling of government bonds. To sell its debt, the government must deliver an attractive investment interest rate for issuing these bonds.
Surely it is clear from above statement that it is not the situation of a budget surplus. So, A (Option 1) is wrong.
In other hand trade deficit means the export is the greater than the import for a particular country. It has no direct relation with government borrowing funds.
So B (Option 2) and D (Option 3) are wrong.
So C (Option 4) is the answer.
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