The term seigniorage refers to the government's ability to
A)raise revenue by creating money
B)raise revenue by selling government securities to the private sector
C)control the central banking system
D)raise revenues by raising taxes
E)stop hyperinflation by imposing wage and price controls

Question

Quizplus · Accepted Answer

Seigniorage refers to the profit that a government earns by issuing currency. This profit comes from the difference between the cost of producing currency, which is usually quite low, and the face value of the currency. In effect, the government is creating money out of thin air and using it to finance its operations. This ability to raise revenue by creating money is what distinguishes governments from other economic agents.

The Term Seigniorage Refers to the Government's Ability to