Explain Why Inflation Is a Way for Governments to Default

question 15

Essay

Explain why inflation is a way for governments to default on a portion of the debts they owe.

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Definitions:

Unliquidated Debt

Debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

Accord and Satisfaction

Accord and satisfaction is a legal contract where a dispute is settled by the parties involved agreeing to give and accept something of value in different terms than the original agreement.

UCC Section 3-311

A provision in the Uniform Commercial Code that addresses the accord and satisfaction by use of a negotiable instrument.

Paid-in-Full Check

A paid-in-full check is a check by which the issuer intends to settle a debt completely, often accompanied by a statement indicating that the payment is meant to resolve the obligation in full.