When the budget deficit is financed entirely through money creation,the real budget deficit is equal to which of the following?
A)ΔH
B)ΔH - ΔP
C)(ΔH)/ P
D)(ΔH)/ H
E) P[(ΔH) / H]

Question

Quizplus · Accepted Answer

When the budget deficit is financed entirely through money creation, the real budget deficit is equal to the change in the money supply (ΔH) divided by the price level (P), which is represented by option C: (ΔH)/P. This formula adjusts the nominal increase in the money supply for the price level to reflect the real value of the budget deficit.

When the Budget Deficit Is Financed Entirely Through Money Creation,the