Question

Why do governments borrow money and pay interest when they could print all the interest-free money they need themselves?

Answer 1

As we know, an increase in the supply of money will increase the inflation level in the economy. So, if a country will print money instead of borrowing money in a needy situation, then it will harm the economy and leads to a huge increase in the inflation level in the country.

Borrowing money doesn't increase the supply of money because the country has to return the money (borrowed money) to the lender with a fixed interest rate after a certain period. It is also not beneficial for the investors and individuals who had saved money, because printing money will decrease or devaluate their value of money. It is also an ideal decision for any country to borrow money and pay interest rates as borrowing money is an injection variable for the economy.