An inflation tax is a tax on people who hold money. As inflation reduces the purchasing power of money, those who hold cash or other forms of money lose value, essentially as a tax imposed by the inflationary policies of the government.

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An Inflation Tax

Question 22

Multiple Choice

An inflation tax

A) Is usually employed by governments with balanced budgets.
B) None of these answers.
C) Is an explicit tax paid quarterly by businesses based on the amount of increase in the prices of their products.
D) Is a tax borne only by people who hold interest bearing savings accounts.
E) Is a tax on people who hold money.

Correct Answer: