A sudden increase in the U.S.price level
A)makes creditors in dollars better off.
B)makes creditors in dollars worse off.
C)do 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 would decrease the value of the dollar. This means that creditors, who are owed money in dollars, would receive repayment in dollars that are worth less than when the loan was originally made. Therefore, creditors in dollars would be worse off.

A Sudden Increase in the U.S.price Level