In the early 1990s, Serbia, a developing country, experienced hyperinflation because its central bank increased the money supply too rapidly. Serbia's central bank most likely adopted this monetary policy because:
A)it didn't care about inflation.
B)it believed that its actions would not trigger inflation.
C)the Serbian government granted independence to the central bank.
D)the Serbian government had no other way to finance its expenditures.

Question

Quizplus · Accepted Answer

The Serbian government likely increased the money supply rapidly as a means to finance its expenditures, especially in times of economic distress or conflict, when traditional means of raising funds (like taxes or borrowing) are insufficient or not feasible. Hyperinflation often results when governments resort to printing money to cover their spending needs.

In the Early 1990s, Serbia, a Developing Country, Experienced Hyperinflation