Fiscal Policymakers May Actually Welcome Some Inflation for All of the Following

question 39

Multiple Choice

Fiscal policymakers may actually welcome some inflation for all of the following reasons except:

• A) it potentially raises tax revenues.
• B) it reduces the real value of the national debt allowing governments to "default" on a portion of their debt.
• C) interest payments tend to be fixed so the real interest payments are reduced.
• D) it weakens the independence of the central bank.

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Definitions:

Long-term Debt

Loans and financial obligations lasting more than one year, often used to finance capital investments or operations.

Total Capital

The sum of a company's debt and equity, representing the total funds that a company can employ in its operations and growth.

Interest Charges

The cost incurred for borrowing money, typically expressed as a percentage of the total amount borrowed.

Sales

The transactions of selling goods or services within a specified period, often measured to assess company performance.