One effect of inflation is that it is a tax that redistributes goods and services from
A) government to households.
B) investors to savers.
C) government to businesses.
D) households and businesses to the government.
E) businesses to households.

Question

Quizplus · Accepted Answer

Inflation acts as an implicit tax on both households and businesses, as the value of their money decreases. However, it benefits the government by allowing them to collect more revenue through increased taxes on higher-priced goods and services. Therefore, one effect of inflation is that it redistributes goods and services from households and businesses to the government.

One Effect of Inflation Is That It Is a Tax