The revenue or profit that a sovereign government earns by issuing currency, specifically the difference between the face value of a coin/note and its actual cost of production and distribution, is known as ___.

Answer: seigniorage

When a central bank prints a Rs. 2000 note, the physical cost of paper and ink might be just Rs. 3, but the note commands Rs. 2000 in purchasing power. This massive margin is seigniorage. While it is a legitimate source of revenue for the state, excessive reliance on printing money to fund fiscal deficits leads to hyperinflation, effectively acting as a hidden tax on the public's cash holdings.