Which of the following is a feature of the 'Modern Monetary Theory' (MMT) perspective?
A. A sovereign currency issuer faces no purely financial constraint on its spending and the main limit is inflation
B. Governments are always financially constrained like households
C. Only balanced budgets are sustainable
D. Monetary financing is always inflationary regardless of capacity utilisation
Answer: Option A
Solution (By JKSSB Mock Tests)
Modern Monetary Theory argues that a government that issues its own fiat currency cannot be forced into involuntary default and that the relevant constraint on spending is the availability of real resources and the risk of inflation.
Explanation:
Cross elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another related good. It is positive for substitutes and negative for complements.
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