Consider an Economy That Has the Following Monetary Data

question 11

Multiple Choice

Consider an economy that has the following monetary data.
The monetary base and the money supply are expected to grow at a constant rate of 20% per year.Inflation and expected inflation are 20% per year.Suppose that bank reserves and currency pay no interest,all currency is held by the public,and bank deposits pay no interest.What is the cost to the public of the inflation tax?

• A)$60
• B)$140
• C)$190
• D)$200

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Definitions:

Artificial Legal Person

A non-human entity that is given legal rights and responsibilities, such as a corporation or a government body.

Bylaws

The internal rules of management adopted by a corporation at its first organizational meeting.

Incorporate

The process of legally forming a corporation, which is a type of business entity recognized as separate from its owners.

Articles Of Incorporation

The document that is filed with the appropriate state official, usually the secretary of state, when a business is incorporated and that contains basic information about the corporation.