Posted: November 18th, 2015

Macroeconomics

Macroeconomics

PART I

Directions: Please write a paper that is at least two pages in length in which you address the question below.

1. Suppose you explain the concept of an inflation tax to a friend.  You correctly tell them, “When a government prints money to cover its expenditures instead of taxing and borrowing, it causes inflation.  An inflation tax is simply the erosion of the value of money from this inflation.  Therefore, the burden of the tax lands on those who hold money.”  Your friend responds, “What’s so bad about that?  Rich people have all the money, so an inflation tax seems fair to me.  Maybe the government should finance all of its expenditures by printing money.”
• Is it true that rich people hold more money than poor people do?
• Do rich people hold a higher percent of their income as money than poor people?
• Compared to an income tax, does an inflation tax place a greater or lesser burden on the poor?  Explain.
• Are there any other reasons why engaging in an inflation tax is not a good policy?
• Who is responsible for who is wealthy and who is not wealthy in this country and why?
• How does money flow from the less fortunate to the more fortunate?  Is the system broken?  Explain your viewpoint and properly cite your references.  Be sure to identify the difference between what is an opinion and what is based upon research.  To what degree is this an ethical question and not an economics one?  Be sure to explain your reasoning.

PART II: Reflection Paper

1. After you have reviewed this module’s material about the Federal Reserve, write a reflection paper on whether or not you think the Fed has too much power.  What danger, if any, is there in what the Fed does?  Could the Fed have created, caused, or made worse the economic crisis in recent years?  Reflect and be sure to document your reasons.  Your submission must be at least one page in length and in APA format.

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