The existence of inflation does which of the following?
A)reduces tax distortions
B)allows governments to benefit from seignorage
C)reduces shoe-leather costs
D)reduces the costs associated with money illusion

Question

Quizplus · Accepted Answer

Inflation allows governments to benefit from seignorage, which is the profit they receive from printing money. This is because the value of money decreases due to inflation, which means it takes more money to purchase the same goods and services. Therefore, governments can print more money and benefit from the profit they earn from it. The other choices (A, C, and D) are not related to the existence of inflation.

The Existence of Inflation Does Which of the Following