WBCS.LIVE practice question

Which one of the following is likely to be the most inflationary in its effect?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Repayment of public debt
  2. Borrowing from the public to finance a budget deficit
  3. Borrowing from banks to finance a budget deficit
  4. Creating new money to finance a budget deficit

Correct answer and explanation

Correct answer: Creating new money to finance a budget deficit