An increase in the inflation rate will lead to a ________ nominal interest rate,which will ________ the debt-to-GDP ratio.

Question

Quizplus · Accepted Answer

An increase in the inflation rate leads to a higher nominal interest rate, as higher inflation erodes the purchasing power of money, and lenders require compensation for this. This increase in nominal interest rate will raise the debt-to-GDP ratio because it increases the interest payments on outstanding debt, which adds to the overall debt burden.

An Increase in the Inflation Rate Will Lead to a ________