Printing money to finance government expenditures

Question

Quizplus · Accepted Answer

Printing money to finance government expenditures leads to an increase in the money supply which causes inflation. This imposes a tax on everyone who holds money, as they can now buy less with their savings due to the decrease in the value of their money. This is known as the "inflation tax". Option A is incorrect because printing money causes the value of money to decrease, not rise. Option C is incorrect because the US government also receives income from taxes and borrowing, not just from printing money.

Printing Money to Finance Government Expenditures