When interest income is taxed and the inflation rate rises, the tax revenue collected by the government
A) could either increase or decrease.
B) increases.
C) doesnʹt change.
D) decreases.

Question

Quizplus · Accepted Answer

When the inflation rate rises, the interest rate also rises. This means that the interest income earned by individuals also increases. As a result, the tax revenue collected by the government increases as well.

When Interest Income Is Taxed and the Inflation Rate Rises