why would printing more bills cause the value to go down? Why wouldn’t prices stay the same?
In: Economics
Money is not ‘real’ in a sense. It doesn’t have any actual intrinsic value. We use it to represent actual value. So the total amount of money in circulation represents the total value of goods and services available in the economy. You can’t increase this total value (at least not by printing money), so printing more money decreases the value of each unit of money.
I’ll try to give a simple example. Let’s imagine we have a very simple economy made up entirely of $100 and 100 cheeseburgers. So each cheeseburger would be worth $1. So let’s print out another $100. There is now $200 in the economy. Can you buy 200 cheeseburgers? No, there aren’t that many. You can still only buy 100, so the $200 now represents 100 cheeseburgers, and a cheeseburger costs $2.
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