Each country has different rules for printing money. The basic objective in most countries is to smooth out economic fluctuations and keep inflation low. However, there are several instruments that central banks can use to manage the money supply in order to acheive these objectives:
1) conduct open market operations -- buying and selling government securities, which raises or lowers the money supply
2) change the lending rates to banks
3) change reserve requirements
Each central bank needs to find its own approach to using the above three tools to manage the money supply. The approach will depend on many factors, including the role of banks, the sophistication of financial markets, etc.
2007-05-30 01:53:16
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answer #1
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answered by Allan 6
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It seems like your question was misunderstood! The way I understand it is that you meant when can governments print money?
The answer varies from one country to another! However historically speaking some countries printed out so much money at a higher growth rate than that of the economy that it caused serious inflation like the Italian Lire and the French Franc.
In order for countries to avoid these kinds of problems there has to be a clear economic reason behind printing money. Also there usually has to be either gold, silver, or foreign currency in the Central Bank's reserves that would be equal to the amount of money being issued.
Printing money without having some reason for it can have serious economic outcomes which is why governments don't resort to that unless it was vital.
I hope this answered your question!
2007-05-30 08:52:37
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answer #2
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answered by Leen 2
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There are two ways to finance its budget deficit. It can either "sell bonds" or "print money". The RBA 'prints money' when it increases the supply of high powered money, typically through open market purchases that buy up part of the debt that the Treasury is selling.
The short run links between money and deficits that come from central bank policy and then the use of money printing as a means of financing government budgets
financing government spending throught the creation of high powered money is an alternative to explicit taxation. Howerver, for most of the industralised economies, the creation of high-powered money is a fairly minor source of revenue. Governments can-- and some do-- obtain significant amounts of resources year after year by printing money, that is, by increasing high-powered money, This source of revenue is called seigniorage, which is the government's ability to raise revenue through its right to create money.
When the government finances a deficit by creating money, it in effect keeps printing money, period after period, that it uses to pay for the goods and services it buys.
2007-05-30 08:07:24
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answer #3
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answered by Meow Meow 2
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Work
2007-05-30 06:13:35
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answer #4
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answered by Anonymous
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You can't do it. It's extremely illegal. It's called counterfeiting
2007-05-30 06:06:56
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answer #5
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answered by ? 5
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I'm pretty sure it's illegal everywhere...Duh.
2007-05-30 06:05:30
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answer #6
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answered by Alice K 7
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