Answer: Shredded paper should make a fine mulch. In my experience it is easiest to spread it in the garden if it is moistened first to keep it from blowing around and then covered with a layer of something a bit heavier such as straw or shredded wood chips. The paper will decompose faster than the wood chips, since the surface area is so great in relation to its overall bulk. It will decompose fastest where it is in direct contact with the soil, too. I would estimate that a good base layer a couple of inches thick and covered by some straw would last about a season. Since the ink may be of concern, I would suggest using it around ornamental plantings rather than in the vegetable garden.
Shredded paper should also compost just fine, and would be considered the same as any other high carbon ingredient such as autumn leaves or straw. The speed of decomposition would depend on the overall composition of your compost, although again you could expect the paper to decompose faster than something like wood chips.
And again, because of the unknown ink, the conservative gardener would use this compost only on ornamental plantings.
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