UPSC CSE Prelims

Correct Option: D Explanation: Financing a deficit by creating fresh money increases monetary purchasing power without a corresponding immediate rise in output, making it most inflationary. Option-wise Analysis: A: Incorrect - Can be expansionary but debt repayment reshuffles financial claims; it is less directly inflationary than new-money creation. B: Incorrect - Borrowing from the public largely transfers existing purchasing power from savers to government. C: Incorrect - Bank borrowing may expand credit, but its monetary impact is less direct than overt monetisation. D: Correct - Correct: printing/creating new money to finance the deficit can add the greatest inflationary pressure.