A sudden increase in the U.S. price level
A) makes creditors in dollars better off.
B) makes creditors in dollars worse off.
C) does not affect creditors in dollars.
D) makes creditors in DM worse off.
E) makes lenders worse off.

Question

Quizplus · Accepted Answer

A sudden increase in the U.S. price level will reduce the purchasing power of the dollar. As a result, creditors who have lent money in dollars will be paid back with dollars that have lower purchasing power. This will make creditors in dollars worse off.

A Sudden Increase in the U.S. Price Level