With an inflation tax:
A) everybody loses.
B) all individuals in an economy feel the pressures equitably.
C) there is a redistribution of income from owners of real assets to income earners.
D) there is a redistribution of income from currency holders to owners of real assets.
E) the government has a lot of debt to repay.

Question

Quizplus · Accepted Answer

With an inflation tax, there is a redistribution of income from currency holders to owners of real assets. This is because as inflation increases, the value of currency decreases, and those who hold real assets, such as property or stocks, can benefit from the increase in their nominal value. However, those who hold currency, such as savers, will see a decrease in the purchasing power of their money. Therefore, the inflation tax is regressive, as it disproportionately affects those with less wealth and less ability to invest in real assets.

With an Inflation Tax