Question

What does the government spend its money on? Who does the government owe money to? Where does the money come from? Does a devaluation help the economy?

Answer 1

ans:The government's financial plans, like households, are about prioritising spending. It has to give funds for infrastructure, welfare schemes like NREGA, subsidies and salaries among other requirements. From 2017-18, all government spendings have been listed under two head: Revenue Expenditure and Capital Expenditure.

The public holds $18.23 trillion, or 75.1%, of the national debt. 1 Foreign governments hold about a third of the public debt, while the rest is owned by U.S. banks and investors; the Federal Reserve; mutual funds; state and local governments; and pensions funds, insurance companies, and savings bonds.

Where Does Money Come From? Central banks create money either by printing it or by buying bonds in the treasury market. When central banks buy bonds, they usually buy their own country's treasury bonds, and their purchases are made from banks that own bonds.

Does a devaluation help the economy? A devaluation (depreciation) occurs when the exchange rate falls in value. This causes exports to be cheaper and imports to be more expensive. In theory, it can help increase economic growth, though it may cause inflation.