How does the government create money?

The government creates money through a process called monetary policy. This involves the central bank, which in the US is the Federal Reserve, adjusting the money supply by changing interest rates and managing the flow of credit. When the central bank lowers interest rates, borrowing becomes cheaper and more accessible, which promotes economic growth and increases the money supply. The Federal Reserve also has the power to print money, although this is typically only done in times of economic crisis. Overall, the government creates money through a combination of monetary policy and direct action by the central bank.

This mind map was published on 21 May 2023 and has been viewed 95 times.