Money can be considered as a record that is accepted as a compensation or payment for any services or goods. Money provides a socio-economic base to a country.
What defines the amount of money a country can print?
Central bank has not defined any set values or pattern to limit the printing amount of currency. The necessity is that it should be enough to provide services, transfer goods and also regain the value of currency. This value of currency depends on enormous factors like associated interest rate, average exports as well as current, fiscal deficit and many more.
Usually, Central Bank prints approx. 2–3% of the total Gross Domestic Production. This percentage depends on a country’s economy and may vary accordingly. Developing countries print more than 2–3% of total GDP. Circulation of money also depends up on the amount of black money and in turn affects money availability in legit channel.
How much currency is sufficient?
A country may print as much currency as it needs but it has to give each note a different value which further called as denomination. If a country decides to print more currency than it is needed, then all the manufacturers and sellers will ask for more money. If the production of currency is increased with 100 times, then the pricing will also rise accordingly.
The printed money should be produced in perfect balance with the value of goods and services. That is the reason why a country can produce more currency or money when its economy is succeeding
In emerging countries, a major part of population comes out of poverty. Thus, government should provide enough currency to its consumers so that they may fulfil their needs. This is called as Incremental money supply which should be in an appropriate proportion with the actual output of the country’s economy.
Over supply of currency leads to inflation and in turn decreases purchasing capacity. In developed countries, usually demand and supply be in proportion, that’s why goods and services go together in equilibrium
In an urge to make a country fully accomplished and richer, more currency shouldn’t be produced. Because, instead of supporting economy, this may cause inflation.
