How is real seignorage revenue related to inflation? How does the quantity of real seignorage revenue change as inflation rises from zero to a positive level, to still higher levels?
What will be an ideal response?
Real seignorage revenue is the inflation rate times the level of real money balances. As inflation rises, real money balances decline. Initially, as inflation rises from zero, real seignorage revenue rises, because inflation rises more than real money balances fall. Real seignorage revenue continues to rise with higher inflation rates until it hits a point at which it begins to decline, because real money balances begin to fall more than inflation rises.
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Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?
A) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. D) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
The marginal utility of a unit of good Y to Jane is
A. the additional utility that Jane gets from consuming one more unit of Y. B. defined in money terms as the minimum amount Jane is willing to pay for that additional unit of Y. C. defined in money terms as the maximum amount Jane is willing to pay for all the Y she buys except that additional unit. D. All of the responses are correct.