Wondered why don't RBI just print more notes to get rid of poverty? What is the exact reason which hinders government from not ending poverty by printing unlimited notes??
Printing of money should always match the total production of goods and services in the country.Printing more notes causes inflation which destroys the economy. Recession and inflation are realted to money circulation. In our country money circulation is controlled or regulated on the basis of monetary policy, the policy which refers to action central banks take and fiscal policy, refers to the government's revenue collection and spending decisions. Money circulation increases inflation. As a result demand will increase where as the supply would remain same thus firm will increase the price . When the price of overall goods increases, then the inflation increases. And we know how inflation has emptied the pockets of people.
But the idea of printing money is a tried and tested method. In 2004 the president of African nation of Zimbabwe , which was a British colony thought of printing more notes. After their independence the president decided to transfer the ownership of farm lands from white landowners to local peasants. Since the locals were not equipped with modern farming techniques , farm produce drastically declined. As a result unemployment and poverty both rapidly increased. So the government of Zimbabwe decided to print more notes and distribute it to the locals. They printed notes in big denomination of 1 million dollar, 100 billion dollar and even in 100 trillion dollars. But printing more notes increased money circulation and the price of goods rose exponentially. This might surprise you that they paid a whooping amount of 30 billion Zimbabwe dollars to buy Just a loaf of bread. Thus resulting in hyperinflation. From 2004 to 2009 the price of goods were changing almost every day and inflation rate was around 97% a day.Eventually Zimbabwe abondoned their own currency and started using US dollar.
Venezuela ,a South American country witnessed the same problem when they decided to over print notes. Hyperinflation in the country collapsed their economy.
So if everyone starts receiving money for free,the speed at which the quantity of money will rise will be higher than the speed at which the other items will increase. It is possible to print unlimited notes but that doesn't add value. Money has value when people and government believe in it's value.