According to the material, a weaker dollar would affect the government's debt burden by doing what?

• A. Decreasing the cost to pay back deficits.
• B. Increasing the cost to pay back deficits.
• C. Having no effect on the cost.
• D. Eliminating the deficit.

Answer: (A)

A weaker dollar tends to push up domestic prices and nominal GDP. When debt is issued in the domestic currency, inflation erodes the real value of that debt, and a larger nominal economy can make the debt burden easier to service relative to the size of the economy. So the cost to pay back deficits falls in real terms, which is why the material says it decreases the burden.

It wouldn’t mean the government suddenly pays more in nominal dollars, nor does it eliminate the deficit entirely. The burden is reduced in real terms, not erased, and there is still a deficit to address.