Central banks in developing countries:
A)do not monetize government debt.
B)monetize government debt, but in a more limited manner than developed countries.
C)monetize government debt to roughly the same extent as developed countries.
D)monetize government debt to a much greater degree than developed countries.

Question

Quizplus · Accepted Answer

Central banks in developing countries often monetize government debt to a much greater degree than developed countries. This is due to limited access to international capital markets and a less developed domestic financial sector, making it difficult to finance government deficits through borrowing. Monetizing debt involves the central bank buying government bonds, effectively printing money to fund government spending, which can lead to inflation if done excessively.

Central Banks in Developing Countries