why inflation happens. Why does it matter how much of our money is printed?
In: Economics
Money gains its value from the country’s economy. The better a country’s economy is, the more valuable the money is. If you increase the amount of money in circulation without equally increasing the value of the economy, the money become less valuable—inflation.
Let’s say the economy is valued at $1 billion, and there is also $1 billion available in money. This means that a single dollar is valued at one billionth of the economy. If the country decides to print ten times as much money, but the economy doesn’t change, then that means that money will be worth ten times as less than before. Instead of one dollar represent one billionth of the economy, it now takes ten dollars to get the same value.
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