Inflation Can Reduce the Burden of Debt for a Sovereign

question 19

Multiple Choice

Inflation can reduce the burden of debt for a sovereign borrower because

• A) High inflation reduces interest payments on existing debt
• B) High inflation makes issuing new debt cheaper
• C) High inflation raises the nominal value of tax revenues and GDP without raising the value of existing debt
• D) High inflation causes foreign currency debt to fall in value in local currency terms
• E) High inflation reduces the nominal value of existing debt.

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