FreeMoney

 

Dear Way Steadmoney,

Borrowing money isn't exactly free, it has to be paid back but there are more consequences than just the price of borrowing. To achieve economic growth, it is essential that your country encourages investments from the private sector to jump start the economy. Continuously borrowing money will dissuade investing because of "crowding out." Crowding out is when the government borrows so much money that real interest rates rise due to the reduced supply of loanable funds in the loanable funds market. This makes it more expensive for investors to borrow money and invest into your country's economy and thus results in less investing. To begin fixing this issue, you must first reduce the government deficit as much as possible. The government deficit is the amount of your government's spending minus income, equalling how much needs to be borrowed. Once your country reduces spending and increases income enough to reach a more balanced budget, you should have to borrow less which then increases the supply of loanable funds, lowers the interest rate, and encourages investing and economic growth. Good luck!