Task 3: Why not just print money?
What’s the solution to a recession, a time of little economic activity? Just print money! Sounds reasonable, doesn’t it? Let’s see if this will work by using an example.
Let’s pretend that all the students in your class make up the ENTER population of the country, and the teacher represents the government. Let’s also pretend each student has exactly $1.00.
Since we are in a recession, let’s have the teacher, who represents the government, print money. He prints $1.00 more for everyone. Now everyone has $1.00 more to spend. More money to spend sounds like a great way to get us out of recession, since more money to spend means demand for goods and services.
Then if that works, why don’t we give MORE money away? How about $100? Now we have lots of money to spend. So no more recession, right?
Not really, because we have only looked at one side of the problem. As more and more people receive more and more money, what’ll happen?
Since everyone has more money, the students all go shopping to spend that extra money. This causes the demand for goods and services to rise, and people who sell goods and services raise price. For example, if you could buy a new music CD at $10 in the past, now the price could be $1,000! This is called inflation.
So, the original reason for printing all this money was to help get us of recession, but we have only replaced one problem with another.
1.T 2.T 3.F 4.F 5.F
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