Final answer:
Printing more money reduces the purchasing power due to inflation. More money chasing the same goods leads to higher prices
Step-by-step explanation:
When the government prints more money, it can lead to inflation, which decreases the purchasing power of that money. Inflation occurs when there is an increase in the supply of money without a corresponding increase in goods and services. As a result, the value of each unit of currency decreases, and you can buy less with the same amount of money.
For example, let's say you have $100 and there are only 100 apples in the market. Each apple would cost $1. Now, if the government prints more money and doubles the money supply, there will still be only 100 apples, but now there is $200 in circulation. As a result, the price of each apple would increase to $2.
Therefore, when the government prints more money, the purchasing power of that money decreases because there is more money chasing the same amount of goods and services.
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