TED-Ed: How do governments create money out of thin air? | Jonathan Smith

The video discusses the global economic impact of crises, highlighting job losses and business struggles. Governments responded with large relief packages, funded through central banks. Central banks manage money supply and can't print unlimited money due to inflation risks. Quantitative easing, a method used by central banks, involves buying bonds to increase cash flow without severe inflation. The Federal Reserve's bond purchases during crises helped fund relief efforts. However, concerns about long-term effects and potential system subversion remain. Quantitative easing is still evolving, with its full impact yet to be seen.

What is one action that governments cannot take to manage the economy?

• Decrease taxes

• Implement economic policies

• Increase the money supply

• Create jobs through infrastructure projects

Why is printing unlimited money not a viable long-term solution for economic crises?

• It leads to deflation

• It decreases employment

• It increases government debt

• It can cause inflation

What is the primary goal of quantitative easing?

• To increase taxes

• To reduce government spending

• To infuse the economy with cash while controlling inflation

• To decrease the money supply

How does the Federal Reserve's purchase of treasury bonds affect other investors?

• It increases the return on bonds

• It incentivizes lending to riskier entities

• It stabilizes bond prices

• It discourages investment in small companies

What concern do some economists have about central banks buying government debt?

• It may lead to increased taxes

• It could result in higher interest rates

• It could subvert the economic protection system

• It might cause a decrease in inflation