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WAEC Economics 1998 Question 25

Question 25

Money and Inflation

If a government which owed a company N10,000 in 1976 paid the debt fully in 1985 when the value of money had depreciated by 20 percent, such a government had

  1. A.lost
  2. B.been placed at par with the company
  3. C.gained
  4. D.stabilized the value of the money
  5. E.increased the value of the money
Show the answer and explanation

Answer: C (gained)

Explanation

The government repaid money worth 20% less than what it borrowed, so the debtor gained and the creditor lost.