James d. Gwartney

Exhibit 8: Money Supply Growth and Inflation, 1992–94
CPI
1.92
1.93
4.92
4.93
7.92
10.92
7.93
10.93 1.94
4.94
7.94
10.94
-10
10
20
30
40
50
60
70
80
90
100
%
0
M1
Source: The graph is from History of Monetary Development in Ukraine (2006), Petryk, Oleksandr, National Bank of
Ukraine, p.7. Data source: State Statistics Committee of Ukraine, own calculations.
Monetary stability is an essential ingredient of the environment for economic progress.
Without monetary stability, potential gains from capital investment and other exchanges
involving time commitments will be eroded and the people of the country will fail to realize
their full potential.

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105
Video:
The Effects of Printing Money

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106
Prudent Fiscal Policy
Taxes are paid in the sweat of every man who labors. If those taxes are
excessive, they are reflected in idle factories, in tax-sold farms, and in hordes of
hungry people tramping streets and seeking jobs in vain.
— Franklin D. Roosevelt, Pittsburgh, October 19, 1932
When high tax rates take a large share of
income, the incentive to work and use
resources productively declines. The
marginal tax rate
(?)
is particularly
important. This is the share of additional
income that is taxed away at any given
income level. The marginal tax rates vary
across countries. For example, in the
United States in 2015, if a taxpayer with
$60,000 in taxable income earned an extra
$100, he or she had to pay $25 of that $100
in federal income tax. Therefore, the
taxpayer faced a marginal tax rate of 25 percent. The marginal tax rate in Romania is 16%; in
Poland it is 32% if a taxpayer earns more than €20,000; and in France it is up to 45% for
incomes over €152,260.
As marginal tax rates increase, the share of additional earnings that people get to keep
declines. For example, at the 25 percent marginal tax rate, individuals are permitted to keep