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

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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)

Borrowing from banks to finance a budget deficit

(d)

Creating new money to finance a budget deficit

Answer:

(d)

Core Books/NCERT

Explanation

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