Unemployment - Magic Wand
Suppose I could wave a magic wand and prevent inflation from happening. If the government didn’t need to worry about inflation, it could create and spend money until everyone who wanted a job had one.
Since printing money doesn’t create the things that you want to buy, something bad still has to happen if the government prints too much money. So long as businesses can produce the extra goods and services that are bought with the new money, everything works fine. The problems begin when businesses start having trouble expanding. Once everyone has a job who wants one, businesses can’t hire more people to expand production. If they can’t expand production, they won’t be able to make the things that people want to buy with the new money. The result is shortages.
Earning money that you can’t spend because the store shelves are bare isn’t helpful. If inflation were controlled, the government would needs to stop printing money before businesses start having trouble expanding production. If it overshoots, all is not lost. It just has to destroy some of the money it created. It can do this by destroying some of the money it collects through taxes.
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