How are newly-printed U.S. dollars inserted into the economy? Obviously they don’t just hand stacks of bills out to people, so what do they do to begin circulating it?
In: Economics
They give it to banks. Banks then disseminate it out to people when they request withdrawls, exchanges, etc, as part of their normal business function.
The government also seizes (old) money from banks when they do this, to ensure that the balance of inflation vs economic stimulation is maintained, or at least managed.
When the government decides to pay people, they give the money to a bank and then tell the bank to pay someone. If the bank pays someone, they usually give the money to that person’s bank.
The government pays lots of people in different ways.
In the US, they are giving people 1,400 right now. Last year they also gave out a lot of money.
When someone is old, they can apply for social security, and the government gives them money.
If someone needs healthcare the government pays for it through Medicare and Medicaid.
Some of this money they get from tax payers, some of this money they get by taking loans from other countries, and some of this money they print and then tell the banks to pay it.
In the end, I would say most of it ends up in the pockets of rich people – but it’s too much to fit in a pocket – the banks have big vaults for them.
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