Which of the following might encourage the government to let inflation rates rise?
A)The government has more work to do when there is an AD excess.
B)The government has to make higher interest payments with higher inflation rates.
C)Social Security and retirement benefits are indexed.
D)A higher inflation rate reduces the budget deficit.

Question

Quizplus · Accepted Answer

A higher inflation rate can reduce the budget deficit as government revenues increase faster than expenditure due to inflation, making it easier for the government to manage its finances.

Which of the Following Might Encourage the Government to Let