The inflation tax revenue is defined as
A)the inflation rate plus the growth in the real money base
B)the inflation rate minus the growth in the real money base
C)the inflation rate minus the real money base
D)the inflation rate times the real money base
E)the inflation rate times the growth in the real money base

Question

Quizplus · Accepted Answer

The inflation tax revenue is defined as the inflation rate times the real money base. This is because the government can effectively "earn" revenue by printing more money, which leads to inflation. The real value of the money base decreases, but the nominal amount increases, allowing the government to spend more without explicitly taxing the public.

The Inflation Tax Revenue Is Defined as