Question: Revenue from the inflation tax: The amount of money the government raises from the inflation tax is ?M. Consult the statistical tables at the back of the Economic Report of the President (available online) to answer the following questions:
(a) How much currency was in circulation in 1981? What was the size of the monetary base in 1981?
(b) If the monetary base is the measure of M, how much revenue was raised from the inflation tax between 1980 and 1981, in dollars? What fraction was this of 1981 GDP?
(c) Why does this exercise ask you to do these calculations for the year 1981 instead of some other year?