If the government prints a $500 bill and it takes the government $2.50 to print the bill, then the seignorage that the government collects is:
A) $2.50.
B) $500.
C) $502.50.
D) $497.50.

Question

Quizplus · Accepted Answer

Seignorage is the difference between the face value of the currency and the cost of producing it. In this case, the face value is $500 and the cost of production is $2.50. Therefore, the seignorage collected by the government is $497.50 (500-2.50 = 497.50).

If the Government Prints a $500 Bill and It Takes