ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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printing money
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taxation
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borrowing
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none of the answers is correct
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Detailed explanation-1: -This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless. We have seen many governments give in to this temptation, and the result is a hyperinflation.
Detailed explanation-2: -Seigniorage refers to the profit made by a government when it issues currency. It is simply the difference in the value of the currency versus the cost of producing it. For example, if a central government bank produces a bill worth $10 and it only costs $5 to make it, there is a $5 seigniorage.
Detailed explanation-3: -Monetisation occurs when the central bank buys bonds directly from the government. It is called ‘money printing’ as new money is created (not necessarily banknotes) without a corresponding increase in nominal GDP.
Detailed explanation-4: -The Reserve Bank of India (RBI) prints and manages currency in India, whereas the Indian government regulates what denominations to circulate. The Indian government is solely responsible for minting coins. The RBI is permitted to print currency up to 10, 000 rupee notes.