When the budget deficit is financed entirely through money creation, the real budget deficit is equal to which of the following?
A) OH.
B) P(OH/H).
C) OH/OP.
D) OH/P.
E) OH/H.

Question

Quizplus · Accepted Answer

When the budget deficit is financed entirely through money creation, the real budget deficit is equal to the nominal deficit (OH) divided by the price level (P), which is represented by OH/P.

When the Budget Deficit Is Financed Entirely Through Money Creation