What is one effect of high inflation on debt?

High inflation has the effect of reducing the real value of money over time. When inflation is high, the purchasing power of each dollar declines. This means that when a borrower pays off debt during a period of high inflation, the dollars used for repayment have less purchasing power than when the debt was incurred. Essentially, the borrower pays back the loan with money that is less valuable in real terms than the money they initially borrowed.

For example, if someone took out a loan for $10,000 and inflation rates rise significantly, by the time they pay back that loan, the value of those dollars is considerably less, making it easier for the borrower to pay off the debt. This dynamic is why option C is the correct answer, highlighting how the value of money decreases during inflation, affecting the real burden of debt repayment.