If everyone in the US was given $1000 per month, paid for by a goods and services tax of 10%, would prices then skyrocket, making the extra money useless?

For example, if I wanted to buy products X, Y, Z in a given month, which each cost \$200, then \$1000 would obviously pay for that. But would merchants all raise their prices drastically higher, since they know everyone has free money and can afford the higher prices? Would this cause so much inflation that the extra $1000 would effectively become meaningless?

Edit: This question is unique from the possible duplicate, because it specifies an income amount, tax amount, and source of the tax which can be input into economic models to get a specific answer.

  • $\begingroup$ I’m not sure this is the best forum to start vetting candidates’ policies; it could easily deteriorate. It would have been better to phrase this as a question about a basic income policy. There are questions already about the basic income. $\endgroup$ Mar 22, 2019 at 1:29
  • $\begingroup$ It depends where the money comes from, i.e. how the program is funded. If it's funded from existing taxes, by substituting other forms of welfare with UBI (as some [conservative proposals] do) then I'd expect minimal inflationary effect. At the other extreme, if the treasury just printed this UBI money, then of course that would have the usual effect of increasing inflation by increasing the monetary mass. And somewhere in the middle, if it were funded with new taxes... it depends what that would do to the economy as a whole. $\endgroup$ Mar 22, 2019 at 3:35
  • $\begingroup$ @BrianRomanchuk This is not a political question. Usually on StackEx, people expect questions to be precise, not general. I only included the candidate so you would know exactly what the structure of economic proposal in question was. I searched the site and found no similar questions. Universal Basic Income is not even a tag. $\endgroup$ Mar 22, 2019 at 15:12
  • $\begingroup$ @Fizz I stated in the question that program is funded by a 10% good and services tax. You say in this case, "it depends what that would do to the economy as a whole". My question about inflation is essentially "what would [this exact proposal] most likely do to the economy as a whole" and the answer is "it depends on what it would do to the economy". I am very ignorant of economics theory (which is why I'm posting here). Does economic theory not answer questions about the economy as a whole? $\endgroup$ Mar 22, 2019 at 15:27
  • $\begingroup$ It doesn't. Ask separately if a VAT/GST increase (or introduction) causes or doesn't cause inflation. There's no clear answer to this. $\endgroup$ Mar 22, 2019 at 15:52


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