Answer to Question #89396 in Macroeconomics for Adebisi

Question

Why do country borrow money instead of printing it when they need money?

Answer 1

Printing money doesn't create new money. Their amount increases, but their worth remains the same. Any government could very well to print money when they need, but it obligatory will cause hyperinflation. 

The order of borrowing money by banks and be government differ. When banks "borrow" money, it does effectively create money because the depositor expects to be able to get the money back at any time, but the bank assumes that most won't actually do this and lends out most of the money to other people. If everyone did actually ask for their money back at once, the bank would bancrupts. In opposite when governments borrow money, holders of government debt don't have money they can spend (they can turn it into money they can spend but only by finding someone else to buy it). That's why government debt doesn't create inflation in itself.