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GS Paper IUPSC Prelims 2013
Banking & Financial System
Question No. 115Interactive Test Mode
00:00
+2-0.66

Q115. Which one of the following is likely to be the most inflationary in its effect?

Which one of the following is likely to be the most inflationary in its effect?

Select the correct option below (or cross out options to eliminate)
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Official Answer Key & Detailed Solution

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Official UPSC Answer KeyUPSC Prelims 2013 • Indian Economy

Correct Answer: Option (D) — Creating new money to finance a budget deficit

Concept & Option Breakdown

Standard Reference Verified

• Creating new money (printing currency / RBI monetization of deficit) expands the reserve money base directly, generating the highest multiplier effect on money supply without any corresponding increase in real economic output. • Repaying public debt, borrowing from the public, and borrowing from banks shift existing savings rather than generating purely unbacked new money.

Elimination Heuristic & Exam Approach

Financing deficits via new money creation creates pure net expansion of high-powered money, making it unequivocally the most inflationary method.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2013 (Q115)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Banking & Financial System
Official Answer KeyOption (D) — Creating new money to finance a budget deficit

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Frequently Asked Questions — UPSC Prelims 2013 Q115

What is the official answer for UPSC Prelims 2013 GS Paper I Question 115 (Indian Economy)?

The official UPSC answer key for this 2013 Indian Economy (Banking & Financial System) question is Option (D): "Creating new money to finance a budget deficit". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2013 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Banking & Financial System". You can explore all repeated questions from Banking & Financial System in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Banking & Financial System UPSC Prelims question using option elimination?

Financing deficits via new money creation creates pure net expansion of highpowered money, making it unequivocally the most inflationary method.

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Previous QuestionConsider the following statements: 1. Inflation benefits the debtors. 2. Inflation benefits the bond-holders. Which of the statements given above is/are correct?
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