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

[UPSC Civil Services Exam – 2021 Prelims]

(a) Repayment of public debt

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

(c) Borrowing from the banks to finance a budget deficit

(d) Creation of new money to finance a budget deficit


Answer: (d)        

Explanation:

  • Creating new money to finance a budget deficit is a situation where the government prints additional currency to cover the shortfall in its budget.
  • When a government resorts to printing new money to finance its deficit, it poses a higher risk of inflation. This is because an increase in the money supply leads to an automatic rise in customer demand, subsequently causing an increase in Aggregate Demand.

Consider the following statements:                                                                   The Parliament of India can place a particular law in the Ninth Schedule of the Constitution of India. The validity of a law placed in the Ninth Schedule cannot be examined by any court and no judgement can be made on it. Which of the statements given above is/are correct?

Consider the following statements:                                               

Read More »

Consider the following statements:                                                         The Parliament of India can place a particular law in the Ninth Schedule of the Constitution of India. The validity of a law placed in the Ninth Schedule cannot be examined by any court and no judgement can be made on it. Which of the statements given above is/are correct?

Consider the following statements:                                               

Read More »

Useful Links

Download
Neyyar App

Left Menu Icon