How does the economy “grow”? Where does the new money comes from?

Question

How does the economy “grow”? Where does the new money comes from?

In: 398

Answer 1

“New” money comes from borrowing, and is created everyday. When the loans are paid off, the money is destroyed. As an economy grows, more people borrow which creates more money. Money is in essence debt, and debt is money. Fiat currencies like the US Dollar and the Euro are “elastic”, in that they expand (inflate) and contract (deflate) with the economies they are used within.