Suppose, in 2008, the federal debt was $5 trillion. That year, the United States ran a deficit of $455 billion. During the course of the year, the inflation rate was 3.8%. How much is the "inflation tax"?
What will be an ideal response?
In order to calculate the "Inflation tax", multiply the federal debt by the inflation rate ($5 trillion
× 0.038) = $190 billion = Inflation Tax. Effectively, the federal deficit is reduced to $455 billion -
$190 billion = $365 billion.
You might also like to view...
If the manager of a nonprofit enterprise sets prices below market clearing levels, she
A) increases the net revenue of the enterprise. B) provides herself with control over a valuable good. C) reduces her personal popularity. D) produces all of the above consequences.
Why is the market demand curve for public goods calculated as a vertical summation of individual demand curves?
What will be an ideal response?
The labor-force participation rate tells us the fraction of the population that is able to participate in the labor market
a. True b. False Indicate whether the statement is true or false
A friend tells you that his income has risen every year by 5 percent. At the same time, prices, on average, have risen by 5 percent. Your friend claims he is better off. Your friend
A. Has experienced an increase in real income only. B. Really is better off as he suggests. C. Has experienced an increase in nominal and real income. D. Is experiencing money illusion.