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

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

CollectorBabu · Accepted Answer

Correct Answer: Creation of new money to finance a budget deficit ​. Creation of new money to finance the deficit is the most inflationary. In all the other cases only circulation of money occurs but not creation of new money into the economy. New money infuses liquidity without any proportional asset to balance it. Creation of new money mostly leads to hyperinflation which refers to rapid and unrestrained price increases in an economy, typically at rates exceeding 50% each month over time. Hyperinflation can occur in times of war and economic turmoil in the underlying production economy, in conjunction with a central bank printing an excessive amount of money. This is also part of deficit financing.

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

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

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