Suppose that the value of a bond is initially $1,000 at the…
Suppose that the value of a bond is initially $1,000 at the beginning of the year and inflation is 8% over the course of 1 year. What did inflation do to the real value of the debt (liability) after 1 year for the debtor and the real value of the bond (asset) for the bondholder (creditor)?
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Suppose that we have the following information concerning the government’s finances and the macroeconomy for a given year: Government Debt: $15 trillion Inflation: 8% Nominal Deficit: $2 trillion What is the real deficit for the year?
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