Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Question

Quizplus · Accepted Answer

If the United States decided to pay off its debt by printing new money, it would lead to an increase in the money supply without a corresponding increase in the supply of goods and services. This would lead to inflation, causing the prices of goods and services to rise (B). People who had lent money at a fixed interest rate would feel poorer (C) since the value of their money would decrease over time due to inflation. Additionally, people who held money would feel poorer (A) because the purchasing power of their money would decrease as inflation rose. Therefore, all of the above options are correct (D).

Suppose the United States Unexpectedly Decided to Pay Off Its