Kim is paid $50,000 per year, and pays an annual income tax of 10 percent. Due to an inflation rate of 10 percent, her pay increases to $55,000, which puts her in a higher tax bracket where she must pay 20 percent. Kim has experienced:
A. the inflationary cost of tax distortion.
B. an increase in her purchasing power.
C. bracket costs.
D. the deflationary cost of tax distortion.
Answer: A
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