What is the difference between a state government borrowing to fund the construction of, say, a new school building adn borrowing to balance the current budget?
Describe the limits financial markets impose on state government borrowing. How are they different from the limits these same markets impose in Federal government borrowing?
The budget deficit in any given fiscal year is the difference between government's outlays (spending) and government's revenues (receipts). Government deficits are often financed by borrowing. The government does that by issuing bonds with varying maturities. These bonds are sold to the Fed or to the public directly (or through the Fed). When government bonds are sold in the market anyone could buy them; banks, financial institutions, pension funds, individuals, foreign individuals and foreign public and private institutions. The ...