Assume That in an All-Currency Economy the Real Interest Rate

question 1

Multiple Choice

Assume that in an all-currency economy the real interest rate is 4%,the expected rate of inflation is 8%,and the nominal interest rate is 12%.The monetary base equals $50 billion.The real seignorage revenue collected by the government would equal

• A)$4 billion.
• B)$6 billion.
• C)$8 billion.
• D)$12 billion.

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Definitions:

Medicare Tax

A federal tax that funds Medicare, a healthcare program for those age 65 and over, deducted from employee earnings and matched by employers.

State Unemployment Tax

A tax paid by employers to a state fund to cover benefits for workers who have lost their jobs; rates can vary based on the employer's industry and experience with unemployment claims.

Federal Income Tax

A charge imposed by the IRS on the yearly income of individuals, corporations, trusts, and other legal entities.

Social Security Tax

Taxes collected to fund social security programs, typically levied on both employers and employees.