Seignorage is also known as an inflation tax since ________.

Question

Quizplus · Accepted Answer

Seignorage refers to the profit that a government earns by printing money. When governments print money, the money supply in the economy increases, leading to a decrease in the purchasing power of money balances since the same amount of money can buy fewer goods and services. This erosion in the value of money balances is akin to a tax on the holders of money balances and is called the inflation tax. Therefore, the correct answer is A.

Seignorage Is Also Known as an Inflation Tax Since ________