Which case represents the largest increase in the real national debt?
A) The price level increases by 500 percent and nominal debt increases by 500 percent.
B) The price level increases by 200 percent and nominal debt increases by 600 percent.
C) The price level decreases by 50 percent and nominal debt increases by 300 percent.
D) The price level increases by 400 percent and nominal debt increases by 200 percent.
E) The price level decreases by 90 percent and nominal debt increases by 200 percent.

Question

Quizplus · Accepted Answer

The real national debt is calculated by adjusting the nominal debt for changes in the price level. In case C, the price level decreases by 50 percent, effectively doubling the real value of the debt, while the nominal debt increases by 300 percent. This results in the largest increase in the real national debt compared to other scenarios.

Which Case Represents the Largest Increase in the Real National