What does the term "limited supply" in cash refer to?

The concept of "limited supply" in cash primarily arises from the understanding of how money is regulated and controlled within an economy. When stating that the government controls the total money circulation, it reflects the reality that national governments and central banks manage the amount of money available in the economy through various monetary policies. This includes regulating the issuance of currency and setting interest rates, which can influence the availability and accessibility of cash.

Governments may decide to increase or decrease the supply of money based on economic conditions, aiming to maintain stability, control inflation, and encourage economic growth. Unlike the notion that cash cannot be produced at will (which could misinterpret the role of monetary authorities), it’s the controlled and purposeful issuance of cash that establishes the principle of a limited supply.

In contrast, the other options do not accurately capture the nuances of monetary supply. For instance, cash can be physically produced, but its production and distribution are always subject to government regulation. Moreover, the idea that all currencies have an unlimited print option overlooks the crucial balance that authorities maintain to avoid hyperinflation and devaluation of currency. The underlying principle of limited supply is therefore central to understanding economic policy and the functioning of financial systems.