The federal government borrows from the capital markets to cover budget deficits, which occur when government spending exceeds its revenues. Borrowing is done through the issuance of fixed-income securities such as Treasury bills, bonds, and notes. This process enables the government to fund public services, programs, and infrastructure projects without immediately raising taxes.
* A. To raise capital for streets, sewers, and waterworks: While such projects are funded by borrowing, they are typically under the purview of municipal or provincial governments rather than the federal government.
* B. To support the capital markets: This is an indirect result but not the primary reason for borrowing.
* D. To support the expansion of corporations: Corporate expansion is financed through private or corporate capital markets, not federal borrowing.