Imagine You Live in a Country with Huge Public Debt

question 32

Multiple Choice

Imagine you live in a country with huge public debt and an uncertain future. Monetization of this public debt is most likely to lead to which of these outcomes?

• A)Inflation
• B)Stagflation
• C)Reduced money supply
• D)High interest rates

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Definitions:

High Interest Rates

High interest rates refer to periods or situations where the cost of borrowing money is elevated, which can decrease consumer spending and business investment.

Usury Law

Regulations that cap the maximum interest rate that can be charged on loans, aimed at preventing exorbitant or unreasonable interest rates.

Quantity of Money

The quantity of money refers to the total amount of money, including cash and deposits, available in an economy at a particular time.

Unconscionably High Rates

Charges or fees that are excessively high and considered unreasonable or unethical, often in the context of lending or service provision.