What is inflation?

Economists sometimes refer to an “inflation tax”. Which of the following statements best describes what they h?

• Economists sometimes refer to an “inflation tax”. Which of the following statements best describes what they have in mind? a. Many tax laws cause great inefficiency in the presence of inflation. b. Many tax policies cause substantial redistribution of income during inflationary periods. c. When the government prints money to pay for its expenses, inflation occurs, and this causes a reduction in wealth for everybody who holds on to money. d. When inflation occurs, nominal interest rates rise, which causes an enormous transfer of wealth between borrowers and lenders. e. None of the above.

• Answer:

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