Author Question: State two social benefits of inflation. What will be an ideal ... (Read 20 times)

bobbie · **on:** Jun 30, 2018

State two social benefits of inflation.

What will be an ideal response?

Question 2

The relationship between the level of saving and the level of consumption is called the savings function.

Indicate whether the statement is true or false

coreycathey · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The social benefits of inflation are as follows:
a) Inflation caused by money creation acts as an implicit tax. It increases the government's revenue by transferring purchasing power from consumers and producers in an economy to the government.
b) Inflation can temporarily reduce the real interest rate and the real wage rate. This increases an employer's willingness to hire more and produce more.

Answer to Question 2

FALSE