Opponents of Using the Inflation Tax to Finance Government Budget

question 24

Multiple Choice

Opponents of using the inflation tax to finance government budget deficits argue that:

• A)the government can raise taxes to eliminate any budget deficit.
• B)inflation is ultimately beneficial in the long run.
• C)the inflation tax is a temporary solution that requires ever higher levels of inflation to remain effective.
• D)the economic slowdown produced by the inflation tax is more damaging than the hyperinflation that would occur in the absence of the inflation tax.