It is true that when institutions print more money, it is not a healthy sign for the economy. It may look nice but it isn’t good for the economy. A term called ‘quantitative easing’ is used when the government supplies more money than the demand. When a government prints more money without considering the growth of real output it eventually reduces the value of money and this inevitably causes the inflation rate to increase. Governments often find safety in printing money when they fail to service their borrowing by selling bonds. These signs are obviously not good for the economy as the consequences of printing more money are not so good.
HOW PRINTING MORE MONEY AFFECTS THE ECONOMY?
Mostly, to avoid recession, governments increase the money supply. In the case of the declining circulation of money, it doesn’t necessarily cause inflation. But if inflation rises, many other aspects of the economy also get affected. For example, savings fall. When inflation rises, people start using their savings for the purpose of consumption. Additionally, due to inflation, it becomes difficult for people to do transactions and people do not find any profit in the field of investment. One of the greatest impacts of increased money printing is the devaluation of the currency.