Question

Assume that the demand for real money balance is:
M/P= Y[0.6-(r+pe
)]
Income, Y= 1000. Real Interest Rate, r = 0.05 (5%)
Expected Inflation Rate pe is constant at 0.05% (5%)
calculate the seignorage if the rate of growth of nominal money rate is 7%

Answer 1

Answer:

In monetary economics, the quantity theory of money is one of the directions of Western economic thought that emerged in the 16th-17th centuries. The QTM states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply

Answer 2

Answer:

Seigniorage is the difference between the actual money value and the cost of producing and distributing the currency.