Inflation accounting for the debt argues the following:
A)The change in the value of the debt when inflation occurs complicates income tax codes, and is the reason for the tax changes of 2003.
B)The portion of interest payments that compensate lenders for inflation should be considered repayment of debt rather than interest expense.
C)The debt represents an inflationary problem, and grows more rapidly when people fear inflation.
D)The portion of the deficit dedicated to repayment of interest on the debt should not be considered part of the deficit, because it is a transfer.

Question

Quizplus · Accepted Answer

Inflation accounting for the debt argues that the portion of interest payments that compensate lenders for inflation should be considered repayment of debt rather than interest expense. This is because inflation reduces the value of money over time, and lenders must be compensated for this loss of purchasing power. Therefore, it is argued that the inflation component of interest payments is simply a repayment of the principal amount of the loan, rather than an expense.

Inflation Accounting for the Debt Argues the Following