Consider an Economy That Has the Following Monetary Data

question 46

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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