What does the term "monetizing the debt" mean?
A. Borrowing money from foreign banks
B. Increasing taxes to reduce the deficit
C. Printing more money to pay government debt
D. Using gold reserves to back the national currency
Answer (1)
The correct answer is letter C. Printing more money to pay government debtMonetizing the debt happens when a country’s central bank, like the Bangko Sentral ng Pilipinas, creates new money to buy government debt instead of raising money through taxes or borrowing from investors. This increases the money supply and can lead to inflation.If the Philippine government borrows heavily and the BSP prints new pesos to help pay it off, it can cause inflation because there is more money circulating without an increase in the number of goods and services. This practice is dangerous when overused, and it can lead to a loss of confidence in the currency, like what happened in Venezuela and Zimbabwe.
