The inflation tax is the effect on the public of the:
A) higher tax paid by individuals whose incomes are indexed to inflation.
B) sales taxes paid during periods of inflation.
C) reduction in the value of money caused by inflation.
D) higher prices consumers pay due to inflation.

Question

Quizplus · Accepted Answer

The inflation tax refers to the reduction in the value of money caused by inflation. When the value of money decreases, it takes more money to purchase the same goods and services, effectively reducing the purchasing power of currency. This results in consumers paying higher prices for goods and services due to inflation, thus acting as a tax on their purchasing power.

The Inflation Tax Is the Effect on the Public of The