Question

1. Imagine that the government decides to abandon the gold standard. What costs would the government be economizing on:
   1. Printing money
   2. Mining costs
   3. Taxes.
2. What is seignorage:
   1. The Lord’s castle
   2. Inflation
   3. The destruction of wealth
   4. The profit gotten from increasing the money supply.

Answer 1

Q. Imagine that the government decides to abandon the gold standard. What costs would the government be economizing on:

Correct answer: b) Mining costs

Under the gold standard, countries were required to maintain stocks of gold. By abandoning it, the need for physical gold is greatly reduced. Under the current standard, printing of money is the main cost.

----

Q. What is seignorage:

Correct answer: d) The profit gotten from increasing the money supply

Seignorage refers to the difference between the face value of a currency and its printing costs. This difference accounts for the main profits of printing money.