Multiple choice

Which of the following is the result, when currency notes are printed to meet the budget deficit?

  1. Inflation

  2. Deflation

  3. Devaluation of currency

  4. None of the above
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A Correct answer
Explanation

When the government prints more money to cover budget deficits, it increases the money supply without a corresponding increase in goods and services production. This leads to too much money chasing too few goods, causing inflation and reducing the purchasing power of money. It is not deflation or devaluation.

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