Which of the following would erode the real value of government debt?
A) A ﬁxed exchange rate.
B) An increase in inﬂation.
C) An increase in real GDP.
D) An increase in income tax rates.

Question

Quizplus · Accepted Answer

An increase in inflation erodes the real value of government debt because the value of the money that the government will repay its debt with decreases in purchasing power. This means that in real terms, the debt becomes less burdensome to the government.

Which of the Following Would Erode the Real Value of Government