Question

Which of the following statements about inflation is​ true? A. Inflation is not a problem because it is just another way for the government to collect revenuelong dash an alternative to the income tax or the sales tax. B. Inflation is a tax on spending money. C. Inflation is a tax on holding money. D. Inflation occurs when real GDP grows more rapidly than the quantity of money.

Answer 1

Answer:

C

Explanation:

Inflation is a persistent rise in the general price levels

Inflation occurs when quantity of money grows faster than real GDP

Types of inflation

1. demand pull inflation – this occurs when demand exceeds supply. When demand exceeds supply, prices rise

2. cost push inflation – this occurs when the cost of production increases. This leads to a reduction in supply. Higher prices are the resultant effect  

Shoe leather cost is when people try to spend money immediately so they would not be holding money for a long time. This is because money loses its value in an inflation.

Because inflation causes money to lose its value, it can be viewed as a form of tax on holding money This is because, tax reduces the amount of money a person has. Also, does inflation reduce the value of money a person has