Proper Inflation Accounting Is Necessary to Measure the Size of the Real

question 62

Multiple Choice

Proper inflation accounting is necessary to measure the size of the real deficit because

• A)as a lender, the government gains from inflation.
• B)otherwise, the deficit is understated in inflationary times.
• C)the government is a borrower that pays back dollars of less real value in inflationary times.
• D)interest payments tend to fall in inflationary times.

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Definitions:

Bond Payable

A long-term liability account that represents a promise to pay a series of payments over time and repay the principal amount at maturity.

Bondholder

An investor or entity that owns bonds issued by corporations or governments, entitling them to receive the bond's face value at maturity, as well as periodic interest payments.

Evidence

Information or documentation used to support or verify entries in the accounting records or financial statements.

Unsecured Bonds

Bonds issued without collateral, relying solely on the issuer's creditworthiness.