Inflation Accounting for the Debt Argues the Following

question 210

Multiple Choice

Inflation accounting for the debt argues the following:

• A)The change in the value of the debt when inflation occurs complicates income tax codes, and is the reason for the tax changes of 2003.
• B)The portion of interest payments that compensate lenders for inflation should be considered repayment of debt rather than interest expense.
• C)The debt represents an inflationary problem, and grows more rapidly when people fear inflation.
• D)The portion of the deficit dedicated to repayment of interest on the debt should not be considered part of the deficit, because it is a transfer.

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Definitions:

Accepting Deposits

A banking activity that involves receiving money from customers for safekeeping or for earning interest, typically in savings or checking accounts.

Systematically Important

Refers to entities or institutions whose failure could trigger a financial crisis, necessitating regulatory oversight to ensure stability.

Economic Growth

An increase in a country's capacity to produce goods and services, compared from one period of time to another.

Credit Default Swaps

Financial derivatives that allow an investor to swap or offset their credit risk with that of another investor.