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Are people in poor countries poor because they don't have enough money? In other words, could a...

Question:

Are people in poor countries poor because they don't have enough money? In other words, could a country get richer by printing more pieces of paper called money and handing those out to its citizens?

Income Difference:

Income difference refers to the disparity in level of income and standards of living across countries. Based on real GDP per capita, income difference between the rich and the poor countries is large and persistent.

Answer and Explanation:

No, a country cannot get rich by printing money.

When we say people in poor countries are poor, the statement is based on real terms. For example, a country is poor is because their real GDP per capita is low. Real GDP per capita is measured in international currency, and hence is not denominated in domestic currency. In this case, printing more domestic currency will only pushes up price level, leads to a higher nominal GDP, but does not affect real GDP, and therefore has no real effect on actual income and standards of living.


Learn more about this topic:

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How Real GDP per Capita Affects the Standard of Living

from Economics 102: Macroeconomics

Chapter 10 / Lesson 2
85K

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