Issues bonds to public for financing of various projects

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Every government collects taxes from people and also issues bonds to public for its financing of various projects and schemes. Hence, if the government cannot repay bonds it will collect money in the taxes and will use such money for repaying bonds. Government has the authority to impose and collect taxes. But usually it will have enough reserve balances for repaying bonds issued. In some cases entire country which includes government may become bankrupt. Like this was happened in a country. Usually this kind of situation does not emerge for developed country.

Reference no: EM131054540

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