RRaahUPSC
2013 · EconomyPrevious Year Question
Q34.
Which one of the following is likely to be the most inflationary in its effect?
A. Repayment of public debt
B. Borrowing from the public to finance a budget deficit
C. Borrowings from banks to finance a budget deficit
D. Creating new money to finance a budget deficit
Answer

D

Explanation

Options b and c will lead to a decrease in the money supply in the market. Between a and d, option d will have more inflationary effect than a, as it will lead to an increase in total money supply in the market.
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