Sunday 8 March 2009

what will happen if a country printed money blindly

The result is very obvious, it will cause Inflation.



The available resources of a country is limited. There is the equal amount of money to be balanced with the amount of resources. Example, a bottle of water cost 1 pound. if too much money printed, it may cost 5 pound to buy a bottle of water.



In a short run, the production capacity of a country is fixed, a sudden amount of money flush into market will results an increases in prices of products,which is actually a decrease in the value of money. It can be understand as an increases in income caused Demand pull inflation.

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