why would printing more bills cause the value to go down? Why wouldn’t prices stay the same?
In: Economics
I find it’s helpful to shrink down the situation. Imagine a building full of people with items, services, etc to buy and sell with each other. It’s a closed system. No stuff is brought in from the outside. They can only use specially printed money which is only good in that building. Everyone is given $100 to start. Soon, going rates get established for things, based on their worth and demand.
Now, everyone is suddenly issued $1000 more dollars. Everyone has a lot more money, but the stuff in the room is still the same. An object that cost $1 before got that price because it was deemed to be worth about 1% of my money. But now $1 is a far lower percent of my money. People are going to start charging more because everyone has more.
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