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Sagot :
Money holders pay a higher inflation tax since their money rapidly depreciates in value. b) Because the real interest rate remains positive while the nominal interest rate is adjusted for inflation, wealth held in saves is not subject to the inflation tax.
A tax on nominal assets is exactly what the inflation tax is. the majority of the government. When debt is represented by non-indexed nominal assets, its value is diminished. A government that creates money to pay its deficit imposes an inflation tax as prices increase. The tax is paid by those who own nominal assets like money. Tax inflation exists because when governments print money to cause inflation, they typically benefit from it because they obtain a greater amount of real revenue and can lower the real value of their debt. One source of inflation is a commitment problem of a central bank wanting to use inflation to boost output.
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