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How does inflation reduce the burden of national debt?

Inflation would make the amount of debt owed by the government less valuable, thereby reducing the burden of the debt. Also, inflation allows the government to increase taxes, which it can put toward paying off the debt.

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While this topic has been fervently debated, most economists agree that inflation in general can be a huge relief for a borrower or debtor, including the government. In general, inflation denotes an increase in the price of goods and services and a decline in purchasing power; cash is not worth as much as it once was.

Wages tend to increase with inflation, meaning the government collects more tax revenue from the worker and uses that revenue to pay down debt. Also, because inflation generally puts more money in someone's pocket, the government can make additional money on taxes from purchases and services.

Also, since inflation reduces the value of cash, the value of the debt as a whole goes down. As inflation increases the Gross Domestic Product (GDP), the debt shrinks in value and becomes easier to pay.

It's important to note, though, that expected inflation will have a different impact on the economy than unexpected inflation. Expected inflation is factored into the market, while...

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