Which of the following best explains why governments may prefer an inflation tax to some other kind of tax?
A)The inflation tax is easier to impose.
B)The inflation tax reduces inflation.
C)The inflation tax falls mainly on high-income individuals.
D)The inflation tax reduces the real cost of government expenditure.

Question

Quizplus · Accepted Answer

The inflation tax is easier to impose because it does not require legislative approval or the administrative costs associated with collecting traditional taxes. It is implemented through the central bank by increasing the money supply, which leads to inflation.

Which of the Following Best Explains Why Governments May Prefer