Seignorage is equal to:
A) the percentage growth rate of nominal money.
B) one divided by the rate of inflation.
C) real money balances.
D) the percentage growth rate of nominal money times real money balances.
E) the rate of inflation.

Question

Quizplus · Accepted Answer

Seignorage refers to the profit made by the government by issuing currency. This profit is equal to the difference between the face value of the currency and the cost of producing it. This can be calculated as the percentage growth rate of nominal money times real money balances, since the government earns seignorage revenue based on the total amount of money in circulation. Therefore, the best choice is D.

Seignorage Is Equal To