Why is currency typically issued only by the national government in most countries?

• A. Because private banks are unable to print physical money
• B. Because local governments lack the authority to collect taxes
• C. To prevent international trade between countries
• D. To maintain control over the money supply and ensure economic stability

Answer: (D)

Verified step by step guidance

1. Understand the role of currency in an economy: Currency serves as a medium of exchange, a unit of account, and a store of value, which are essential for smooth economic transactions.
2. Recognize that issuing currency involves controlling the money supply, which directly affects inflation, interest rates, and overall economic stability.
3. Note that national governments, often through their central banks, have the legal authority and institutional framework to regulate and manage the money supply effectively.
4. Consider that allowing multiple entities, such as private banks or local governments, to issue currency could lead to inconsistent money supply, loss of confidence, and economic instability.
5. Conclude that currency issuance is centralized to maintain control over monetary policy, ensure trust in the currency, and support stable economic growth.