Debt monetisation occurs when:
A) a higher deficit is eliminated with higher tax revenues.
B) a government begins borrowing from foreigners.
C) a budget deficit is financed with money creation.
D) a country experiencing hyperinflation negotiates a reduction in its foreign debt.
E) banks are asked to continue lending during a hyperinflation.

Question

Quizplus · Accepted Answer

Debt monetisation refers to the financing of a budget deficit through the creation of new money by the central bank. This is done by the government selling bonds to the central bank, which in turn creates new money to purchase these bonds. This can lead to inflationary pressures in the economy.

Debt Monetisation Occurs When