If the money supply is 1000, the price level is 5, and the inflation rate is 10%, what is the amount of seigniorage?
A) 200
B) 100
C) 20
D) 5

Question

Quizplus · Accepted Answer

Seigniorage is the revenue earned by the government by printing money. It is calculated as the inflation rate times the money supply. Here, it is 10% of 1000, which equals 100. However, given the choices provided and the context of the question, it appears there was a misunderstanding in the calculation. The correct calculation based on the given formula (inflation rate * money supply) should indeed result in 100, but since that option leads to a discrepancy with the provided choices, and considering typical interpretations of seigniorage in economic terms, there might be a need to reassess the understanding of the question or the provided options. Given the options, none directly correspond to the expected calculation (10% of 1000 = 100), suggesting a possible error in the question setup or in the interpretation of the provided options.

If the Money Supply Is 1000, the Price Level Is