An effect of the inflation tax is that it redistributes income from the:
A)borrowers of fixed-interest-rate debt to the government.
B)borrowers of fixed-interest-rate debt to the lenders of this debt.
C)lenders of fixed-interest-rate debt to the borrowers of this debt.
D)government to the borrowers of fixed-interest-rate debt.

Question

Quizplus · Accepted Answer

Inflation reduces the real value of money. For fixed-interest-rate debt, this means the amount repaid by borrowers (in real terms) is less than the amount originally lent, effectively transferring wealth from lenders to borrowers.

An Effect of the Inflation Tax Is That It Redistributes