ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the government prints too much money, people who sell things for money raise the prices for their goods, services and labor. This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless.

Detailed explanation-2: -Does Printing Money Cause Inflation? Yes, “printing” money by increasing the money supply causes inflationary pressure. As more money is circulating within the economy, economic growth is more likely to occur at the risk of price destabilization.

Detailed explanation-3: -Suppose the government decides to print more money to cater to the rise in demand for its currency in the economy. This action creates a spiral-like situation. The demand increases again, supply is the same, and thus the prices also shoot up. It results in inflation in the economy.

Detailed explanation-4: -Inflation is caused when the money supply in an economy grows at faster rate than the economy’s ability to produce goods and services.