Nations that depend on money creation from the central bank because they cannot borrow to fund deficits are in a situation that economists call:
A) fiscal dominance.
B) fiscal inadequacy.
C) monetary insufficiency.
D) fiscal insufficiency.

Question

Quizplus · Accepted Answer

Fiscal dominance refers to a situation where a country's fiscal policy is constrained by its monetary policy because the central bank is essentially financing the government's deficits through money creation. This can lead to inflation and other negative economic consequences. Therefore, nations that depend on money creation from the central bank because they cannot borrow to fund deficits are considered to be in a state of fiscal dominance.

Nations That Depend on Money Creation from the Central Bank