The second argument is also problematic. Financing the deficit by increasing the moneysupply should cause inflation only when there is not enough room for economicgrowth. Currently, there is no reason toexpect deficits to cause inflation. However, since many financiers believe that deficits ordinarily createinflation, then admittedlythey will be inclined to raise interest rates to offset mistakenly anticipatedinflation. This effect, however, is dueto ignorance, not to the deficit itself, and could be lessened by educatingfinanciers on this issue.
Question #36. 154-08 (22926-!-item-!-188;#058&000154-08)
The author uses the term "admittedly"(see highlighted text) in order to indicate that
(A) the second argument has some truth to it,though not for the reasons usually supposed
(B) the author has not been successful inattempting to point out inadequacies in the two arguments
(C) the thesis that large deficits directly causeinterest rates to rise has strong support after all
(D) financiers should admit that they were wrongin thinking that large deficits will cause higher inflation rates
(E) financiers generally do not think that theauthor's criticisms of the second argument are worthy of consideration
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