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.

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Definitions:

Party Machine

A political organization in which an authoritative boss or group commands the loyalty of supporters and businesses, often using incentives for political support.

Two-Party System

A political system in which two major parties dominate voting in nearly all elections at every level of government.

Two-Party System

A political system dominated by two major parties, often leading to competition for power and influencing the political landscape of a country.

Proportional Representation

An electoral system where parties gain seats in proportion to the number of votes cast for them, as opposed to winner-take-all systems.