Which one of the following is likely to be the most inflationary in its effects?

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Q: (IAS/2021)

Which one of the following is likely to be the most inflationary in its effects?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,306,31,10,10,11,306

keywords: 

{'budget deficit': [0, 0, 0, 2], 'public debt': [0, 0, 0, 6], 'new money': [0, 0, 0, 2], 'effects': [0, 0, 3, 3], 'banks': [5, 6, 5, 25], 'repayment': [0, 0, 0, 5]}

Creation of new money to finance a budget deficit is likely to be the most inflationary in its effects. This is because an increase in the money supply without a corresponding increase in goods and services leads to an increase in demand for goods and services, which, in turn, leads to an increase in prices (inflation).