Which of the following best describes how deficit financing is used in fiscal policy to address budget deficits?

Deficit financing is when a government spends more money than it collects in revenue, like taxes. To cover this extra spending, the government borrows money, often by issuing bonds that investors buy. This borrowing allows the government to continue funding important programs and services, even when there’s a budget deficit. For example, if a country needs to build new schools but doesn't have enough tax money, it might borrow funds to pay for the construction. Over time, the idea is that the economy will grow due to these investments, leading to higher tax revenues in the future, which can help pay off the debt.