Inflation generally causes the taxes paid by individuals and business firms to:
A) remain relatively constant.
B) increase.
C) decrease.
D) become less of a burden.

Question

Quizplus · Accepted Answer

Inflation causes prices of goods and services to rise, which in turn increases the cost of inputs for businesses and leads to higher prices for consumers. The increase in prices generally leads to an increase in tax revenues for the government, as businesses and individuals earn more income and profits. Therefore, taxes paid by individuals and business firms typically increase during periods of inflation.

Inflation Generally Causes the Taxes Paid by Individuals and Business