Developing countries employ the inflation tax because it provides a:
A)long-run solution to their budget problems even if it is politically unpopular.
B)short-run solution that helps keep the government afloat, even if only temporarily.
C)a solution to their inflation problem.
D)long-run solution to both their economic and political problems.

Question

Quizplus · Accepted Answer

Developing countries may resort to the inflation tax as a short-term measure to generate revenue and support government spending when other forms of taxation or borrowing are insufficient or hard to implement. This approach is not a long-term solution to budgetary issues, as it can lead to higher inflation and other economic problems. It does not directly address the root causes of inflation or provide a comprehensive solution to economic and political challenges.

Developing Countries Employ the Inflation Tax Because It Provides A