Outline the way in which a government which issues money can gain real resources. How relevant is th

... Outline the way in which a government which issues money can gain real resources. How relevant is th In almost all modern economies the government plays a central role and will need to pay for its own expenditure. Funds for government expenditure will generally be raised by taxation. But when spending exceeds taxation revenue the government runs a budget deficit and will need to borrow the difference. It can borrow from the private sector by issuing interest-bearing government debt (bonds). Alternatively the public sector can finance the shortfall by borrowing from the central bank (Bank of England in this case) effectively issuing non-interest bearing high-powered money (defined as notes, coins and banks' operating balances at the Bank of England or M0 in the UK). Hence the government faces a budget constraint in a similar way as each individual consumer does, except that it has the right to "print" money. The purpose

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