Inflation Tax

Inflation Tax

 Inflation Tax

Inflation erodes the value of money and the people who hold currency suffer in this process. As the governments have authority of printing currency and circulating it into the economy, this act functions as an income to the governments. This is a situation of sustaining government expenditure at the cost of people's income. This looks as inflation is working as a tax. That is how the term inflation tax is also known as It means, inflation is always the level to which the if seigniorage. government may go for deficit financing-level of deficit financing is directly reflected by the rate of inflation.