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Financing a debt through the direct-issue of currency is called ____.
A) printing money
B) monetizing the debt
C) open market purchases
D) open market sales
Answer: A
Diff: 1 Type: MC Page Ref: 532
Skill: Recall
Objective List: 21.1 Describe how the demand for money is determined
In March 2007, the inflation rate in Zimbabwe reached ____.
A) over 1500 percent
B) over 150 percent
C) over 15 percent
D) over 15000 percent
Answer: A
Diff: 1 Type: MC Page Ref: 532
Skill: Recall
Objective List: 21.1 Describe how the demand for money is determined
The Zimbabwean hyperinflation was caused by ____.
A) the government printing currency
B) wars between rebel factions
C) budget surplus
D) the agricultural sector
Answer: A
Diff: 1 Type: MC Page Ref: 532
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Explain how financing a persistent deficit by money creation will lead to a sustained inflation.
Answer: A budget deficient can lead to an increase in the money supply if it is financed by the
creation of high-powered money. Because the quantity theory of money explains inflation only
in the long run, to produce inflation, the budget deficit must be persistent.
Diff: 1 Type: SA Page Ref: 532
Skill: Recall
Objective List: 21.1 Describe how the demand for money is determined