The real seignorage collected by the government is the product of

Question

Quizplus · Accepted Answer

Seignorage refers to the profits that a government earns by printing money. It is calculated as the difference between the face value of currency in circulation and the cost of producing it. In other words, it is the revenue earned by the government by issuing currency. The real seignorage is the product of the rate of inflation and the real money supply because higher inflation rates mean a higher nominal value of currency in circulation, which results in a higher seignorage for the government. Similarly, a higher real money supply implies that more money is being printed, which also results in higher seignorage earnings. The other options - A, C, and D - are not correct because they do not capture the true nature of seignorage as described above.

The Real Seignorage Collected by the Government Is the Product