Macroeconomics, 2nd Edition by Pearson

THE DEMAND FOR MONEY

179

As depicted, higher levels of seigniorage are possible as we move along the

money demand curve from point F towards E as the demand curve intersects suc-

cessively higher seigniorage curves. After point E as we move along the demand

curve towards point F we reverse this trend as the demand curve intersects suc-

cessively lower seigniorage curves. This gives us the inverted U-shaped seignior-

age curve in panel C. The maximum seigniorage is the point of tangency of the

demand curve for money and the seigniorage curve

s

2

at point E in panel A, E

'

in

panel C. A higher rate of monetary expansion has the direct ...