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

[UPSC Civil Services Exam – 2013 Prelims]

(a) Repayment of public debt

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

(c) Borrowing from banks to finance a budget deficit

(d) Creating new money to finance a budget deficit


Answer: (d)        

Explanation:

  • When the government addresses its budget deficit by generating new high-powered money, it can lead to inflation, resulting in a decline in the purchasing power of existing money held by the public.
  • The monetary base encompasses the overall quantity of currency available in circulation among the public, as well as the commercial bank deposits held in reserves at the central bank.
  • The creation of new money contributes to an expansion of the monetary base, subsequently increasing the money supply. This, in turn, can lead to inflationary pressures.

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:                                               

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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:                                               

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