How Money Printing Affects The Country's Economy | 5% For SL- Charity

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Although there is only one kind of human being living in this world, we have divided them into two types, poor people and rich people. This is just one division. Poor people don't have money where rich people have money. In Sri Lanka, the country's economy is also at a very low level. That economy is not strong because there is a huge debt burden since then. So, I used to wonder why the government could not develop the country by printing money and paying off those debts. I got the answer to that question when I was doing A / L. I thought of writing about this because of a story that was talked about a few days ago.

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What really happens if a large amount of money is printed in a country?

The simplest answer that can be given to this question is inflation. Inflation can be identified as the continuous rise in the general price level. (Here, the magnitude of inflation experienced by an economy is determined not by the change in the price of each commodity, but by the average value of the prices of all goods and services)

So, how does money printing affect inflation?

In this case, the printing of money by a government rather than the actual production (real output) of the economy only increases the amount of money circulating in the economy. It increases the amount of money available to people as the money supply in the economy increases. Then they are tempted to spend more than they used to before buying goods and services. But the goods and services of the economy will not be sufficient to meet the demand for goods and services because the quantity of goods and services available in the market will not increase even if money is printed. Therefore, the prices of goods and services are increased to control the rising demand. This is how inflation occurs in the country.

So, the country cannot cover its expenses by printing new money as it pleases. A few days ago, the Central Bank of Sri Lanka also printed the largest amount of money ever printed in a single day. The reason given for this is that money has been printed to cover the budget deficit due to the loss of government tax revenue due to the current epidemic situation. From what I have learned in the subject, printing money to cover the budget deficit of an economy is not practical.

_{Inflation Rates in Zimbabwe}

The best example is the hyperinflation that occurred in Zimbabwe in 2008. The government had printed money for many reasons such as rising public debt, declining economic output and declining export earnings. This situation stopped after the government stopped printing Zimbabwe dollars and started using US dollars. But by then a lot of people were already helpless.

Maintaining a country's general price level is an important macroeconomic objective. Because the difference here directly affects the purchasing power. This decreases as the price level rises and increases as the price level falls. This incident directly affects the living standards of the people. So, my feeling is that THEY need to be more responsible in making decisions for a country.