For the last few months, you might have listened about term helicopter money. This is the term which is quite famous nowadays and you must be having many questions regarding what is it all about and what its use. This article will try to answer all your questions about helicopter money and help you understand everything you need to know about helicopter money.
Usually, when the government want to boost the economy there is one option for the government that is to borrow the money which results in increasing the debt but by using helicopter money there is no need for borrowing money thus it is preferred.
The second reason for its preference is that it helps in increasing overall demand as compared to quantitative easing which results in boosting the economy well.
WHAT IS HELICOPTER MONEY?
Helicopter money is basically printing new money and distributing it to the public. It is basically an alternative to quantitative easing. This is done at the time of recession or when the interest rate is zero. It is a non-repayable money transferred from central bank to the government and its aim is to make people spend the money and boost the economy.
WHY HELICOPTER MONEY?
Usually, when the government want to boost the economy there is one option for the government that is to borrow the money which results in increasing the debt but by using helicopter money there is no need for borrowing money thus it is preferred.
The second reason for its preference is that it helps in increasing overall demand as compared to quantitative easing which results in boosting the economy well.
CONSEQUENCES OF HELICOPTER MONEY
There is a simple rule that when supply increases so the price decreases. When the supply of the country money increases then the value of the country’s money decreases. When helicopter money is used then more money is printed which results in increasing the supply of the money thus the value of money decreases.
The second negative effect of using helicopter money is that the government can’t extract the money back from the people if they decide to put the money in their savings rather then spending the money which will result in failure of the main objective of the government for boosting the economy.
WHICH COUNTRIES CAN USE HELICOPTER MONEY
Advanced economies such as the USA, EU etc can be better off by using helicopter money. The reason for this is that their currency is used worldwide for international trades thus increasing demand. If currency such as rupee should not be used for this method as they are likely to be affected.
WHY HELICOPTER MONEY IS IN NEWS NOW?
Due to COVID-19, there has been lockdown all over the world. This has resulted in a decrease in consumer spending which has harmed the economy. Many people are out of work. Poor people are not having money even for their daily need so this is one of the option for the government for helping people out and also for boosting the economy during the pandemic.
I hope all your doubts are cleared after reading the article. Please comment on how you like the article and share this with your friends.
