Which statement best characterizes the inflation tax?
A) The inflation tax transfers wealth from the government to households.
B) The inflation tax is the increase in income taxes due to lack of indexation.
C) The inflation tax is a tax on everyone who holds money.
D) The inflation tax is illegal.

Question

Quizplus · Accepted Answer

The inflation tax is a tax on everyone who holds money because when the government prints more money, it decreases the value of money already in circulation. This means that anyone holding money, whether in the form of cash or savings, is effectively paying a tax because their money is worth less.

Which Statement Best Characterizes the Inflation Tax