Ostrem Ch.10 question 7.

I learned about how the government can benefit from inflation through the process that some economists call the "inflation tax." If the government has an army or other government workers that need to be paid and the government is unable to raise enough money through taxes to pay them, the government can use the "inflation tax." This is done by taking advantage of the fact that the government has control of producing the national mint. The government will print lots of new money and use that money to pay their workers. This process increases inflation (sometimes tremendously) by lowering the value of the currency. It leaves the citizens poorer and in a sense the government succeeded in taxing their citizens. I personally think this is a very cheap move by the government. This is happening right now in Zimbabwe.