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

Economic Affairs Inflation

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

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UPSC CSP Previous Year Paper (2013)

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Repayment of public debt

Borrowing from the public to finance a budget deficit

Borrowings from banks to finance a budget deficit

Creating new money to finance a budget deficit

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Explanation:

Borrowing from the public to finance a budget deficit and borrowing from banks to finance a budget deficit will lead to decrease in the money supply in market. Between a and d, d will have more inflationary effect than a, as creating new money will lead to an increase in total money supply in the market.

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