Answer to Question #246013 in Microeconomics for Joy margarette

Question

During the Revolutionary War, the American colonies could not raise enough tax reveneu to fully fund the war effort. To make up the difference, the colonies decide to print more money. Printing money to cover expenditures is sometimes referred to as an" inflation tax". Who do you think is being "taxed" when more money is printed? Why?

Answer 1

If the state generates more currency, the average man will be taxed. This is since the price level causes increased rates and currencies to depreciate over time. As a result, consumers carry less funds with them, causing them to visit institutions more frequently.