Georgia Constitution Practice Exam

Which statement is true regarding the state's ability to borrow money?

1. The state cannot borrow money due to budget requirements.

2. The state may issue bonds for highway construction.

3. There is no limit to borrowed funds.

4. The state may borrow money on behalf of corporations.

The correct answer is: The state may issue bonds for highway construction.

The statement regarding the state's ability to borrow money that is accurate is that the state may issue bonds for highway construction. This is a practice that states commonly utilize as a means to finance public infrastructure projects. By issuing bonds, the state can secure necessary funding for projects such as highways, bridges, and other essential infrastructure that promotes economic development and public welfare. Bonds are essentially a loan taken from investors with a promise to repay the principal amount along with interest after a designated period. When states issue bonds, they usually do so within the limits and regulations set forth by their respective constitutions and state laws, which ensures that borrowing is managed prudently and transparently. This means that while states have the capacity to borrow, it is often intended for specific public purposes, like transportation, rather than for unchecked or arbitrary spending. The other statements lack accuracy as they impose incorrect constraints or misunderstand the borrowing mechanisms available to the state. For example, the idea that the state cannot borrow money due to budget requirements misrepresents the legal provisions that allow borrowing when properly regulated. The assertion that there is no limit to borrowed funds overlooks fiscal responsibility measures that each state typically has in place. Finally, suggesting that the state may borrow money on behalf of corporations does not align with