Question

During the 1945-1946 Hungarian hyperinflation, when the rate of inflation reached $41.9$quadrillion percent per month, the Hungarian government discovered that the real value of its tax receipts was falling dramatically. To keep real tax revenues more stable, it created a good called a "tax pengō," in which all bank deposits were denominated for purposes of taxation. Nevertheless, payments for goods and services were made only in terms of the regular Hungarian currency, whose value tended to fall rapidly even though the value of a tax pengö remained stable. Prices were also quoted only in terms of the regular currency. Lenders, however, began denominating loan payments in terms of tax pengös. In what ways did the tax pengö function as money in Hungary in 1945 and 1946?

Short answer

It providessome way to transfer value in future. The tax pengo will act asa customary ofcredit as lenders denominate loan payments in terms of tax pengos.

Step-by-step solution

Traditional function

Here, as you recognize that the cash is that any mediumthat's universally accepted in an economy by both the sellers and creditors.
In addition,the money has four traditional functions, which are:
1. Medium of exchange:this implies, any item that sellers will accept as payment.
2. Unit of accounting: this suggests, a measure by which prices are expressed. additionally, this can be the common denominator of the value system, a central propertyof cash.
3. A store valuable or purchasing power: this can be the power to carry the worth over time and a necessary propertyof cash.
4. a typical of differed payment: this implies, a property of an item that produces it desirable to be used, as a method of setting debts maturingwithin the future.

Funtion

A "Tax pengo"is that the creation ofa decent throughto stay the important tax revenues more stable,within which all bank deposits were denominated for purposes of taxation.
Here, "a tax pengo" function as money in Hungary in 1945 and 1946 as follow:
- Tax pengo as a store of value: It providessome way to transfer value in future.
- Tax pengo asa regular of deferred payment: Here, the tax pengo will act asa customary ofcredit as lenders denominate loan payments in terms of tax pengos.