When the government monetizes its debt, the results are:
A) higher inflation and benefits for holders of government bonds.
B) lower inflation and benefits for holders of government bonds.
C) higher inflation and losses for holders of government bonds.
D) lower inflation and losses for holders of government bonds.

Question

Quizplus · Accepted Answer

Monetizing debt refers to when the government prints new money in order to buy its own debt, increasing the money supply in the economy. This leads to higher inflation, as there is more money chasing the same amount of goods and services. Holders of government bonds will experience losses, as the increased money supply will decrease the value of the bonds they hold.

When the Government Monetizes Its Debt, the Results Are