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Can the government of a country print money to repay an outstanding loan?
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[QUOTE="Jasz, post: 231034, member: 61772"] In theory, the government of a country could simply print more money to repay an outstanding loan. In practice, this is rarely done due to the negative impact it would have on the economy. If the government were to print more money, the value of that money would go down. This means that inflation would go up. As a result, people would be less likely to purchase goods and services (or borrow money) because the value of their assets would decline as prices rose. This would mean that an increase in taxes would be needed (because people can't pay for things). A decline in demand for products and services, along with higher taxes, leads to a decline in jobs. Additionally, any debts with fixed interest rates (such as student loans or home mortgages) become harder to repay when inflation increases at a faster rate than the interest rate on your debt. However, Every country has its own monetary policy and central bank that determines how the nation will print and distribute currency. The monetary policy of the government is a reflection of the nation's economy and current economic concerns. When the central bank prints more money, it increases supply; in economic terms, this is called inflation. [/QUOTE]
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Can the government of a country print money to repay an outstanding loan?
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