Proponents of Using the Inflation Tax to Finance Government Budget

question 38

Multiple Choice

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

• A)these deficits would be far worse otherwise.
• B)inflation is ultimately beneficial in the long run.
• C)while inflation is undesirable, the breakdown of the economy that would occur in the absence of an inflation tax would be worse.
• D)the economic slowdown produced by the inflation tax is preferable to the hyperinflation that would occur in the absence of the inflation tax.

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Definitions:

Equal Payments

Regularly scheduled payments of the same amount over the term of a loan or mortgage.

Interest Annually

The amount of interest earned or paid over a one-year period, often expressed as a percentage of the principal.

Economic Values

The worth of goods or services as determined by their utility and the market forces of supply and demand.

Annual Rate

A fixed percentage representing the yearly cost or return of a financial product or service.