If the Money Supply Is Currently $100 Million and the Government

question 10

Multiple Choice

If the money supply is currently $100 million and the government prints another $300 million to finance the budget deficit, then we should expect:

• A) a 200 percent inflation rate.
• B) a 3 percent inflation rate.
• C) a 200 million percent inflation rate
• D) a 300 percent inflation rate.

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Definitions:

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, taxes, and costs involved in sustaining the activity.

Discounted Cash-flow Analysis

A financial model that estimates the value of an investment based on its expected future cash flows, discounted back to their present value.

Debts

Money that is owed or due, typically resulting from borrowing funds or purchasing goods and services on credit.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.