= +1 Problem 1. Seignorage. The liquidity function is given by L(T+1) = 200 1001+1: (A) Write out an expression for seignorage at the steady state, S(r). (B) Plot the inflation-tax Laffer curve. Clearly mark intercepts. Why does inflation act like a tax? Who is the taxpayer? Who is the tax recipient? What is the tax base? (C) What is the seignorage-maximizing inflation rate? What is the maximum level of seignorage? (D) The government wants to raise 36 in real value as seignorage. At what rate should it print money? (E) The government wants to raise 136 in real value as seignorage. At what rate should it print money? (F) Show all the values from parts C, D and E on the Laffer curve from part B. (G) In part A we assumed that long-term inflation expectations followed the actual inflation rate. If inflation were kept constant (e.g. static adaptive expectations with zero adjustment), would this allow the government to raise more or less seignorage, everything else equal? = +1 Problem 1. Seignorage. The liquidity function is given by L(T+1) = 200 1001+1: (A) Write out an expression for seignorage at the steady state, S(r). (B) Plot the inflation-tax Laffer curve. Clearly mark intercepts. Why does inflation act like a tax? Who is the taxpayer? Who is the tax recipient? What is the tax base? (C) What is the seignorage-maximizing inflation rate? What is the maximum level of seignorage? (D) The government wants to raise 36 in real value as seignorage. At what rate should it print money? (E) The government wants to raise 136 in real value as seignorage. At what rate should it print money? (F) Show all the values from parts C, D and E on the Laffer curve from part B. (G) In part A we assumed that long-term inflation expectations followed the actual inflation rate. If inflation were kept constant (e.g. static adaptive expectations with zero adjustment), would this allow the government to raise more or less seignorage, everything else equal