Which of the following cases represent the smallest increase in the real national debt?
A) The price level increases by 200 percent and the nominal debt increases by 200 percent.
B) The price level increases by 200 percent and the nominal debt increases by 100 percent.
C) The price level increases by 200 percent and the nominal debt increases by 500 percent.
D) The price level increases by 100 percent and the nominal debt increases by 300 percent.
E) None of the above.

Question

Quizplus · Accepted Answer

The smallest increase in the real national debt would be when the price level increases by 200 percent and the nominal debt increases by 100 percent. In this scenario, the inflation rate is 100% (200%-100%) and the real debt increases by 0% (100%-100%). Therefore, the real burden of the debt has not increased.

Which of the Following Cases Represent the Smallest Increase in the Real