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

(a) Repayment of public debt

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(b) Borrowing from the public to finance a budget deficit

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(d) Creating new money to finance a budget deficit

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Solution

The correct option is D (d) Creating new money to finance a budget deficit
D)
Extremely high rates of inflation are generally associated with high rates of money growth. It is often the result of financing large deficits by printing money

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