Question

Identify one of the governmental funds, explain how it is used, and provide an example.?

Answer 1

The U.S. Government has established a fund called U.S. Government Securities Fund. All the money received from the issuance of government guaranteed or insured securities are accumulated in this fund. There are different class of securities issued under this fund. The Govt utilises this fund in many federal project and offers returns in the form of interest at a fixed percentage to the investor. This fund is also used to control the inflation in the economy. For example, in case if inflation, prices are high because many people have high income. In such scenario the Govt issue securities offering high interest rates to attract people to invest and reduce their cash income. The reverse thing happens in deflation. This helps to balance the economy.

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