A steady decline in the price level for many years indicates that Westeros has been experiencing deflation.

Which of the following agents is most likely to be negatively impacted by the deflation in Westeros?

Choose 1 answer:
(A) The elderly citizens of Westeros, who receive $\$ 200$ every month as a pension
(B) The King, who owes a lot of money to the Iron Bank
(C) A girl who has stored $\$ 20$ in her mattress for 2 years
(D) Hodor, who has $\$ 500$ in a bank account earning $1 \%$ interest every year
(E) The Iron Bank of Braavos, which has loaned $\$ 1$ million to the King interest free

Question

A steady decline in the price level for many years indicates that Westeros has been experiencing deflation.

Which of the following agents is most likely to be negatively impacted by the deflation in Westeros?

Choose 1 answer:
(A) The elderly citizens of Westeros, who receive $\$ 200$ every month as a pension
(B) The King, who owes a lot of money to the Iron Bank
(C) A girl who has stored $\$ 20$ in her mattress for 2 years
(D) Hodor, who has $\$ 500$ in a bank account earning $1 \%$ interest every year
(E) The Iron Bank of Braavos, which has loaned $\$ 1$ million to the King interest free

Accepted Answer

***B*** ∻Key Concept∻ ⚹Debt burden during deflation⚹ ∻Explanation∻ ⚹Deflation increases the real value of debt, making it more expensive for debtors, like the King, to repay their loans.⚹◊How would deflation in Westeros impact the real value of debt owed by the King to the Iron Bank?⍭ Generate me a similar question◊

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