Questions Kids Ask

In AP Psych, we learned about the developmental stages while growing up. Ages 2-7 represent the preoperational stage, a period of time where children are too young to perform mental operations and use intuitive instead of logical reasoning. I remember being around this age learning about money and how it was actually paper. I continued to ask the question the obvious question, “If we need more money, why can’t we just print it?”

Turns out, it doesn’t work that way. If a country attempted to print more money, it wouldn’t make them richer, it would only raise prices and lead to hyperinflation. In 2008, developing countries such as Zimbabwe and Venezuela attempted to fix their economies by printing more money. Instead of allowing their economies to grow, printing more money caused prices to rise by 231,000,000% in a single year. To put this in perspective, an item priced at 1 Zimbabwe dollar cost 231 million Zimbabwean dollars a year later.

So, if printing money won’t solve the issue, what helps an economy grow? The answer lies in basic economics we’ve come to learn over the past semester. In order for an economy to grow, the production of goods has to increase, and they have to be successfully sold. This stimulates the economy creating a constant flow of money going in and out. This is also why when people save their money and do not spend it, it can lead to an economic recession. If nothing is being put into the economy, nothing can result.

However, there is one country that can get richer by printing more money, and that’s us, the United States. This is because other goods around the world are priced at US dollars. Therefore, if we want to buy more to stimulate our economy it is possible. If we were to print too much money though, that would lead us into hyperinflation. We just have a little bit more wiggle room than other countries given our economic state and success.

For those countries desperate to improve their economies and cannot just simply print more money, they avoid hyperinflation by allowing governmental control over prices. Laws are passed to keep certain things at low prices to keep them available to all.
The economy is constantly rising and falling, and it’s up to us as consumers to keep it stable. Buy what you can, reap the utility, and stimulate the economy!


Sources:
http://theconversation.com/curious-kids-why-dont-poorer-countries-just-print-more-money-107633