If a Country with a Large Government Debt Uses Money

question 111

Multiple Choice

If a country with a large government debt uses money creation to service and repay the debt, this will lead to

• A) lower interest rates.
• B) an appreciation of the nation's currency in the foreign exchange market.
• C) inflation, higher interest rates, and a financial crisis.
• D) rapid economic growth, as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt.