{"id":1699,"date":"2024-03-28T19:14:37","date_gmt":"2024-03-28T13:44:37","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1699"},"modified":"2024-04-03T07:17:40","modified_gmt":"2024-04-03T01:47:40","slug":"q-which-one-of-the-following-is-likely-to-be-one-of-the-most-inflationary-in-its-effects","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-which-one-of-the-following-is-likely-to-be-one-of-the-most-inflationary-in-its-effects","title":{"rendered":"Q.\u00a0Which one of the following is likely to be one of the most inflationary in its effects?"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>Repayment of public debt<\/li>\n\n\n\n<li>Borrowing from the public to finance a budget deficit<\/li>\n\n\n\n<li>Borrowing from the banks to finance a budget deficit<\/li>\n\n\n\n<li>Creation of new money to finance a budget deficit<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer: d) Creation of new money to finance a budget deficit<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"notes-hd-660526bf0fe99\">Notes:<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Deficit financing&nbsp;<\/strong>means generating funds to finance the deficit which results from excess of expenditure over revenue. The&nbsp;<strong>gap being covered by borrowing from the public by the sale of bonds or by&nbsp;printing new money.<\/strong><\/li>\n\n\n\n<li>There are\u00a0<strong>three ways<\/strong>\u00a0to finance a budget:\n<ul class=\"wp-block-list\">\n<li>\u200bCreating new currency<\/li>\n\n\n\n<li>Borrowing from internal sources like RBI, issuing bonds, etc.<\/li>\n\n\n\n<li>Borrowing from External sources like WB, IMF, etc.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Government expenditure by printing money boosts incomes and raises private demand<\/strong>\u00a0in the economy. Thus, it\u00a0<strong>fuels inflation<\/strong>. A little increase in inflation is healthy as it encourages business activity. But if the government doesn\u2019t stop in time,\u00a0<strong>more and more money floods the market and creates high inflation<\/strong>.\n<ul class=\"wp-block-list\">\n<li>And since inflation is revealed with a lag, it is often too late before governments realise, they have over-borrowed<strong>. Higher inflation and higher government debt provide grounds for macroeconomic instability.<\/strong>&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Borrowing from the public by&nbsp;<strong>issuing bonds at a lower interest rate<\/strong>&nbsp;will not create inflation. Similarly,&nbsp;<strong>borrowings from banks<\/strong>&nbsp;will not<strong>&nbsp;<\/strong>generate inflation.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Answer: d) Creation of new money to finance a budget deficit Notes:<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[52],"class_list":["post-1699","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-52"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":52,"label":"2021"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1699","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1699"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1699\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1699"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1699"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1699"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1699"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}