When a national economy grows and “makes” more money, does it necessarily mean other economies shrink?

Question

Hi! I don’t know much about economics and maybe didn’t know the right terms to use when searching, but I guess this wasn’t asked before 🙂 If a country produces and sells goods and services internally as well as in exports, for money, and people accumulate it/save it inside the country this money has to come from somewhere, right? But at some point, if things that can be exchanged for money keep being produced, there’s also the need to make more money to “stand in” in for the value of those things? If my currency x is worth the same as the dollar, and I make more of it, let’s say double what is currently circulating, it will be worth roughly 0,5 dollars, right? How is it that more money is put into the economy without lowering it’s value? Does it have to come from other countries?

In: Economics

Answer 1

> If a country produces and sells goods and services internally as well as in exports, for money, and people accumulate it/save it inside the country this money has to come from somewhere, right?

Money is not the substance of an economy, money is the lubricant. If you get a bigger engine, you probably need to put more motor oil in it for it operate correctly. But motor oil doesn’t make up the bulk of your engine. People mostly accumulate wealth through real estate, stocks, bonds, privately owned businesses, things like that. Actual currency is a small portion of wealth accumulation. I get the currency first, but then I quickly use it to invest in something else.

> If my currency x is worth the same as the dollar, and I make more of it, let’s say double what is currently circulating, it will be worth roughly 0,5 dollars, right?

If you doubled it suddenly just on a whim, then yes that would be more or less true. In fact it might fall by a lot more than that, because people don’t want to use a currency which is subject to sudden whimsy. But if you doubled it over time because your economy is growing quickly, there is no reason the exchange rate has to change. The money doesn’t need to come from outside, it can just come from your printing presses, or your central bank’s account ledgers.