The Idea That Inflation by Itself Reduces People's Purchasing Power

question 70

Multiple Choice

The idea that inflation by itself reduces people's purchasing power is called

• A)the inflation tax.
• B)menu costs.
• C)the inflation fallacy.
• D)shoeleather costs.

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Definitions:

Excise Tax

A specific tax levied on the sale of a particular good or service, typically to discourage its consumption or to raise revenue.

Cable TV

A system of delivering television programming to consumers via radio frequency (RF) signals transmitted through coaxial cables or digital light pulses through fiber-optic cables.

Perfectly Inelastic

A demand situation in which the quantity demanded does not change in response to a change in price.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare among entities in the economy.