The Deflation tax and Inflation Stealth Tax Cut the Inflation is a tax on currency. Prices in the UK have risen by the 28.2 % since 2005. A £ 20 note that fell down the back of a sofa ten years ago would now be worth £ 15.60. This is equivalent to a tax of £ 4.40 imposed on the holding of currency. If prices had fallen by the same amount over that period it would be equal to a tax cut on currency holdings of 5.6%. Deflation is a stealth tax cut. Inflation is a stealth tax. Neither were it was not legislated by any parliament.

1. Explain who benefits from deflation and who loses out? Examine separately the effects on businesses, households, and the government.

2. If prices fall but wages do not fall or fall by less than discuss what happens to unemployment?