What is MONEY SUPPLY?

Money Supply and Taxation - what difference can the government identify?

• Government supplies money, loaning out money to the banks at an interest rate. At the same time, they collect taxes from individuals. What are differences between these two ideas? It just sounds like when the government is supplying money, why should there be a need to collect taxes? Or is there a difference between them producing money notes and supplying money notes? Enlighten me a young man with a zero knowledge in economics and finance. Hope these questions be answered entirely. Any input is greatly appreciated. Thanks.

• Answer:

  Where do you think that the money comes from that the government lends to the banks? There are 2 choices: Arbitrarily print money which will drive inflation through the roof; or collect taxes and use that to fund government operations including the lending of money by the central bank.