CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Printing money ______
A. is superior to issuing bonds because it does not affect the debt.
B. is inferior to issuing bonds because it creates more inflation.
C. cannot be used to finance a deficit.
Explanation: Printing money is one way to finance an excess of expenditures over receipts, but it invariably produces higher inflation if it is sustained.

User Contributed Comments 7

User Comment
Cata I think it cannot be used to finance a deficit since most of the countries ruled this action as ILLEGAL.
johnsk I believe printing money by central banks are not illegal at all, Cata.
Hamish Not illegal, but undesirable. Think of the current situation in Zimbabwe.
Fliper333 n some countries it is prohibited by law to finanace budget deficit by printing money, e.g. Ukraine
Joel1980 Ahh, so that's what Cata was talking about... Ukraine. Of course!
EMerkert It is illegal in the U.S., per the constitution, but they do it anyway
cbeliveau It should be illegal.
You need to log in first to add your comment.