Assume that in an all-currency economy the real interest rate is 4%,the expected rate of inflation is 8%,and the nominal interest rate is 12%.The monetary base equals $50 billion.The real seignorage revenue collected by the government would equal

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Real seignorage revenue is calculated as the real interest rate multiplied by the monetary base. Here, 4% of $50 billion equals $2 billion. However, the expected inflation rate also contributes to seignorage, so the total real seignorage is 4% + 8% = 12% of $50 billion, which is $6 billion.

Assume That in an All-Currency Economy the Real Interest Rate