If the government printed more money and spent it in the economy, everyone would have more money. The problem is that if everyone has more money, it's less valuable.
Imagine if one kid, Timmy, at school has a bar of chocolate and no one else does. Timmy’s bar of chocolate is suddenly very wanted and very valuable. You will have to play it really clever to get some chocolate.
But if every kid at school has a bar of chocolate, then Timmy’s chocolate isn’t as valuable as before! It won’t be that hard for you to get some chocolate since everyone has some.
Just the same, if you print more money, everyone has more money and each dollar less valuable.
They tried this in Germany in the 1920s* and Zimbabwe in the 2000s*. They printed a lot of money, but it became a lot less valuable, and people ended up needing wheelbarrows full of cash to go to the shops. If you print more money so that everyone has more money, everyone can afford to pay more. The consequence is that the price of everything would increase, which is called inflation. Imagine if everyone was given $1 million, the price of everything would increase. So that chocolate bar that used to cost $2 now costs $10. You have 5 times more money, but you can’t afford more chocolate.
Writer's Bio: Jenna Harris is a UNSW student studying Commerce and Psychology. She loves to laugh and can’t resist a jigsaw. She’s always trying new things and playing music. Acts of kindness make her heart melt.
