Modern Monetary Theory facts for kids

Modern Monetary Theory (MMT) is an idea about how countries that print their own money can manage their economy. It looks at how governments can use their power to create money to make sure everyone has a job and the economy is strong.

MMT suggests that a government, especially one that prints its own money (like the U.S. dollar or the Japanese yen), doesn't need to worry about "running out" of money. Instead, it can create new money to pay for things like schools, hospitals, or new roads. This is different from how a household or a business works, because they can't just print money.

What is Modern Monetary Theory?

MMT is a way of thinking about how money works in a country. It focuses on governments that control their own money system. These governments can spend money even if they don't have it in a bank account, because they can simply create it.

How Governments Use Money

MMT says that governments can use their spending power to reach important goals. For example, they can spend money to create jobs for everyone who wants one. This is called achieving "full employment."

Money and Jobs

When the government spends money, it puts more money into the economy. This can help businesses grow and hire more people. MMT suggests that if there are people who want to work but can't find a job, the government can spend more to create those jobs.

Who Controls the Money?

In most countries, the government's central bank (like the Federal Reserve in the U.S.) is in charge of creating new money. MMT explains that this gives the government a lot of power to manage the economy.

Fiat Money Explained

The money we use today, like dollars or euros, is called fiat currency. This means its value comes from the government saying it has value, not because it's backed by something like gold. MMT looks at how governments use this kind of money.

Images for kids

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  This picture shows how money moves between different parts of the economy, like households, businesses, and the government.

See also

In Spanish: Teoría monetaria moderna para niños