When a country is going through a very bad economy, I wonder why they simply can’t print more money to get through the crisis.
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When a country is going through a very bad economy, I wonder why they simply can’t print more money to get through the crisis.
When a country prints more money then the people living in that country would have more money to spend on. Their purchasing power increases, which means that now their financial ability to buy products will go high. Now, as many people are purchasing the products, the demand for that product increases. Then that high demand will result in price hike of that product. Soon the product will be expensive.
You might have had this thought when you were a kid. “If the government is so poor, why doesn’t it simply print more money?” You will soon understand how bad a decision that can be through a case analysis of a country that actually tried printing more money to solve its economic crisis. Venezuela was once the richest country in all of Latin America. In modern times, in terms of countries that had it easy, Venezuela by all counts should have been on top of the list.
To get richer, a country has to make and sell more things – whether goods or services. Simple Economics, right? This makes it safe to print more money, so that people can buy those extra things. If it prints more money without making more things, too much money will start chasing a few goods. And if they print a lot more, their prices will go up too fast, and the money will lose its value.