If the government has large budget deficits that cannot be financed by borrowing, the government:
A) prints more money, causing inflation and hyperinflation.
B) prints less money, causing inflation and hyperinflation.
C) collects less taxes, causing inflation and hyperinflation.
D) collects more taxes, causing inflation and hyperinflation.

Question

Quizplus · Accepted Answer

If the government cannot finance the deficits through borrowing, it may choose to print more money to finance its operations. However, this leads to an increase in the supply of money and causes inflation and hyperinflation, which can have detrimental effects on the economy.

If the Government Has Large Budget Deficits That Cannot Be