How can people avoid the inflation tax?
A) by reducing savings
B) by not filing a tax return
C) by reducing cash holdings
D) by spending less

Question

Quizplus · Accepted Answer

Inflation tax is caused by the decrease in the purchasing power of money due to inflation. To avoid this tax, people can reduce cash holdings and instead invest in assets that have a higher rate of return than the inflation rate. This will help maintain the real value of their wealth. Reducing savings or spending less may not be feasible options for everyone, and not filing a tax return is illegal and can result in penalties.

How Can People Avoid the Inflation Tax