I hear a lot of people talking about economic growth, as in over time there is more value in the economy. For example, index funds like SP500 are growing consistently over decades a. On the other hand, economy is just buying stuff from other people with money they got from another person they produced stuff for, which he then sold to other people for money, like a closed loop. If that’s the case how is more money added to the system? how can the market as a whole grow instead of some companies profiting on the expansion of others?
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The answer to this question depends on who you ask and what country you’re talking about. When it comes to the United States, new money is created when the Federal Reserve expands the money supply through a process called quantitative easing. This happens when the Fed buys government bonds from banks and other financial institutions, which in turn gives them more money to lend out. The end result is that there’s more money available in the economy, which can help spur economic growth.
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