Question

1.The right to seignorage is the right to:

	a.	print money.
	b.	raise tax revenues.
	c.	borrow from the public.
	d.	make coins.
	e.	raise an army.

2.Hyperinflation can be caused by:

	a.	both answers.
	b.	none of the answers.
	c.	a collapse of real output.
	d.	the central bank injecting to much money into the economy.

3.Keynesian economists believe that consumers have money illusion, that is:

	a.	they are fooled by the central bank.
	b.	they suffer from the illusion that they will be rich.
	c.	they act on changes in nominal variables instead of real variables.
	d.	they act on changes in real variables instead of nominal variables.

Answer 1

Ans:

1) Option D

make coins.

Seigniorage is the difference between the value of currency and the cost of producing it.Seigniorage right is the right enjoyed by the government to make coins.

2) Option D

the central bank injecting to much money into the economy.

Hyperinflation occurs when the increase in the supply of money is greater than gross domestic product (GDP) growth.This increase in money supply will cause the prices to increase.

3) Option C

they act on changes in nominal variables instead of real variables.

Money illusion means people consider money in nominal terms rather than real terms.