Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to
A)decrease.
B)increase.
C)not change since the changes in the wealth of bondholders and bond issuers offset each other.
D)either increase or decrease depending on other factors.
E)rise in nominal terms,but fall in real terms.

Question

Quizplus · Accepted Answer

An exogenous increase in the price level does not change the aggregate wealth of holders and issuers of private-sector bonds because the loss in the real value of the bonds for the holders is exactly offset by the decrease in the real value of the debt for the issuers.

Other Things Being Equal,an Exogenous Increase in the Price Level