In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant,the inflation rate equals
A)the real interest rate.
B)the nominal interest rate.
C)the growth rate of the nominal money supply.
D)the level of real seignorage revenue.

Question

Quizplus · Accepted Answer

In an all-currency economy with constant rates of money growth and inflation, the inflation rate is equal to the growth rate of the nominal money supply. This is because the nominal money supply includes both the real output and the inflation, and if they are constant, any increase in the nominal money supply must be due to inflation. The real interest rate and the level of real seignorage revenue are not directly related to the inflation rate in this scenario. The nominal interest rate may be affected by inflation, but it is not equal to the inflation rate.

In an All-Currency Economy in Which Real Output and the Real