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Why can the government not just Print more Money?

Overview and case details:

The reserve bank of India, which has its headquarters in the Mumbai manages all the current and the financial regulations of this place. The emplacement of the bank is to check whether the current source of economic concern is being met or not and to keep a check on the regulation which are happening from all around.

The current regulating system of the country and using the monetary policy as well as to establish a proper and financial source of stability in the place of India. Before 1934, the government of India had all the responsibility of printing the money.

This was when a law was passed, and the whole responsibility of printing notes went to the Reserve Bank of India. It was done on the basis of the Reserve Bank of India Act called in the year 1934. Especially, it was noted in section 22 of the act that the Reserve Bank of India gives the authority to print more money and issue currency notes as well.

The RBI does have the full power to print the money for the basis of the entire nation. But the government does have a say in this matter, and their say is what implies the weight for the entire issue up here.

A common issue which arises

Now coming to the central part of the whole article, why cannot the government print all the money that they wish? We mean, they do have the cash printing machine and source, but they want to bid time and see the economy on the downfall? This is a familiar doubt in everyone’s mind, and you might have thought it as well. For the more impoverished places out there, it should depend on the growth of money printing facilities by the government as a whole.

Now let us take an example

Here is an example to understand the whole of the scenario. Suppose there are only people living in an economy. The economy only has the production of one item, and it is wheat. And both of the people get around rs 10 in a whole annum. The total good and services for the economy are served around in the 2kg of rice.

Now to buy around 1 kg of rice, one has to pay around Rs. 10 per kg. Imagine the government of the whole place has started to produce and print more money. If that happens, then, the entire annual income of the people will rise from 10 to 20 rs for the particular annum.

Then the people have to source out the demand for rice, but the produce of rice will stay the same. The order for the rice has gone up, but due to the low productivity of the rice and the sections, the people cannot serve and caters to the needs of the two buyers, and they have to keep it one kg.

And this is when the price of rice rises from Rs 10 to Rs 20 as well since the demand keeps on increasing. So this is a severe case of inflation which is happening in the economy. If the government starts producing more notes, then the order for the items will increase as well because the income of the people will increase. But due to a lower count of the products on the market, the market price of the products will rise from its source.

This is when inflation can rise practically in the whole of the economy, and this can destroy it as a whole.

What are the factors that the government keeps into account while they are printing more money?

Here is the list of factors that the government has to keep in mind while they are listing for the production of more money.

  • The rise of inflation for the market

The increase in increase in the market is the prime reason which comes to the mind of the government in India when they are trying to print more money. It is the increase in the price of the items, but the productivity of the things will be the same or even lower for the future chance as well. So this is when the people have to source out for something which can be good enough for them, and this is when the people have to check out a limitation on the usage and printing of money. 

If the government starts printing more cash, than the rise of the items will happen because the salary of the people will rise. This will cause whole inflation in the economy, and it has the source of destroying the economy as a whole. The power of every unit of money which is produced has its source, and the power of each group can be held into higher regards.

  • Gross Domestic Product

GDP is the value that is also taken into account for the Reserve bank when it is producing money in India. The performance of the economy can be sourced out as a whole with the help and the indication of GDP. It affects the whole of the printing process. The GDP is the growth factor for the whole management of the economy and the sourced out target here. The government, if it starts are printing more money than the value of the GDP, which will also increase in the market. GDP increases in the market and the circulation, which happens as well, and the single unit of the currency can be subsequently be traded for more than the valuable goods and services too.

There are sources for note building too:

There are two types of notes which prevail in the economy. One is stained and the other one is muted. Stained notes are those which can be termed as the one which has become dirty usage. There are two pieces of records which are pasted together, one on the side and the other on the half portion. These are both pieces that are present among the same letter and produced as a whole note.

Mutilated notes are those type of records which happens to take place without the usage of the two pieces since one missing part is not found there.

What is the method which is processed for the need for currency?

There is a stark method that is used by the whole of RBI with the GOI so that the need for the currency can be utilized and it can be printed.

  1. There is a projected GDP figure which is discussed with the RBI and the GOI, which is here. It is the Research that is done based on the current evaluation of the whole premise of the economy. It is the inflation that drives the growth and the base of the economy.
  2. There is a stock note account which is kept on the RBI. This is when the government of India helps to source out the type and the source of funds which has the source and the happening of the whole business. There is a demand draft in which places and the need for the current evaluation in the market as a whole.

Money is something that is used for the payment of the source and the buying of amnesties, products, and other services. A stern check must be kept on the usage and the laid out facts for the printing of money sourced out in India. There is a legal tender that is passed onto by the Reserve Bank of India. This happens and sources out for the laid out details, which take place on the increscent feature by the source of ROI and the GOI together when taken together into account.

Conclusion:

It might be a source of fact that when the whole country is facing a cause of economic problems and a deflated market, then they have to source out something like printing of more money from the bank. It is a loop that we are stuck in. If there is a more massive production plus a source of money into the hole, then it is to be said that the pricing quote and the hunger for the customers increase as well. The printing can make the prices go faster, and the countries have to suffer from a whole source and management of the hyperinflation which can take place. So it is the right decision by the bank not to take into account for more printing of cash.

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