Chapter 33, Problem 5MCQ

To determine

What revenue generated by the government's right to print money is called

Answer to Problem 5MCQ

From the available options, the correct option is Seignorage.

Explanation of Solution

Seignorage refers to the profit which is earned by the government in money printing as it shows the difference between the cost of printing/producing and the value of the currency. Whereas, inflation tax refers to the tax which is charged by the government as a penalty when someone retains currency in a time period of high inflation. Hyperinflation is a rapid and very large increase in the prices of goods and services in the economy. Fiat money is issued by banks and institutions which are local and when money or fund is reserved for different purposes then it is a monetary fund.

Therefore, the correct option is a (seignorage) and all other options are incorrect.

Economics Concept Introduction

Introduction: The government creates money to maintain the supply of money by printing currency such as notes or paper money under the in charge who oversees the supply of money.