If the country's debt is high, why doesn't the government just print as much money as possible to give wealth to the country?
You may have thought of such a question. But you know, if the government prints too much money, the price of goods in a country will increase. How can that be?
For example, the government prints RM10,000 to each resident, so the purchasing power of the people will increase but the supply of goods in the market remains the same.
For example, bread. Every citizen wants to buy bread but supplies are limited. Thus, the price of the bread will increase.
When supply is limited, manufacturers have to raise product prices to meet high demand. Manufacturers also have to bear the cost of raw materials and increase the number of workers, thus causing price increases to occur.
Printing too much banknote actually has the effect of hyperinflation. Zimbabwe for example is a country that has been experiencing hyperinflation for 10 years because the government of that country has printed too many and unlimited banknotes with high value.
During the country's economic downturn in 2008, Zimbabweans had to carry plastic bags full of money to buy necessities such as vegetables, bread and milk. The price of goods also doubled at least in 24 hours.
The highest value of the currency printed last time in 2008 was 100 trillion Zimbabwean dollars but that amount is still not enough to pay the bus fare.
You also need 100 billion Zimbabwean dollars to buy just 3 chicken eggs in 2015? Terrible is not the effect on the country's economy.
Economic failure and inflation in Zimbabwe left the Zimbabwean dollar worthless and suspended forever on April 12, 2019.
To replace the paralyzed Zimbabwean dollar, the country's government had to use 9 foreign currencies and was the only country to use the legal currency the most.
These include the US dollar, Australian dollar, Euro, UK pound sterling, Japanese yen, Chinese yuan, South African rand, Botswana and Indian rupee. All official transactions by the Zimbabwean government use USD.
The situation in Zimbabwe explains why the government cannot print money at will even if the government lacks money because there will be hyperinflation. The value of money falls, the price of goods will increase.
