Business, 23.03.2020 19:42 20jhutchinson

Suppose that there are two countries (Ireland and Belgium) negotiating the government debt criteria for the Eurozone. Ireland has a high ratio of government debt to GDP; Belgium has a low ratio of debt to GDP. Which country is likely to prefer a higher inflation target?A) Belgium, because the real value of its government debt will approach zero faster than Ireland's over time

B) Ireland, because higher inflation will cause larger absolute reductions in the real value of its government debt than in Belgium

C) It makes no difference because high rates of inflation will have proportional effects on the real debt of both countries.

D) both, because each wants to see its real government debt decline

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Suppose that there are two countries (Ireland and Belgium) negotiating the government debt criteria...

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