Principles of Economics, Principle 9: Prices Increase When the Government Prints Excessive Money

Principle 9: Prices Increase When the Government Prints Excessive Money
• When the government prints too much money, it expands the money supply in the
economy, which leads to inflation-a general rise in prices. This occurs because the
increased amount of money competes for the same quantity of goods and services,
diminishing the value of each unit of currency.
• Consequently, people are able to purchase less with the same amount of money,
driving prices higher. This concept, explained by the Quantity Theory of Money,
illustrates how excessive money printing can reduce purchasing power and lead to
economic instability. Notable historical examples, such as Zimbabwe’s
hyperinflation, demonstrate the risks of unchecked money supply growth.