<p>Full capacity means utilization of all resources in economy. That is all labor, capital and other resources are already used at their best uses.   Economy will not always work at its full potential for various reasons. For example, due to fall in aggregate demand during recession, which can cause unemployment to be above natural rate.</p>
<p>Monetary policy or fiscal policy can stimulate economy but only to the point economy reaches full capacity (i.e. all resources are put to their best uses). After that point as Hart mentions monetary stimulus will likely lead just to inflation or potentially hyperinflation.</p>

CC BY-SA 4.0
2021-01-11T03:38:12.973Z
Thank you, again as insightful as ever!
Ritesh Singh
CC BY-SA 4.0
2021-01-11T15:02:34.243Z
Sir/Madam, if/when free, please also consider answering this: https://economics.stackexchange.com/questions/42064/why-dont-governments-do-away-with-the-optics-of-taking-on-debt-against-new-curr
Ritesh Singh
CC BY-SA 4.0
2021-01-11T03:37:02.413Z
2021-01-11T03:37:02.413Z
1muflon1
<p>In response to a <a href="https://www.igmchicago.org/surveys/modern-monetary-theory/" rel="nofollow noreferrer">poll</a> on Modern Monetary Theory, Nobel Laureate <a href="https://www.nobelprize.org/prizes/economic-sciences/2016/hart/facts/" rel="nofollow noreferrer">Oliver Hart</a> said that Governments financing deficits by printing more money &quot;can quickly lead to inflation or even hyperinflation once the economy is close to full capacity&quot;.</p>
<p>What does he mean by the economy being close to full capacity?</p>

<inflation><currency><money-supply><government-debt><money>
Oliver Hart said that financing deficits by printing money can lead to hyperinflation "once the economy is close to full capacity". What does he mean?
Ritesh Singh
# Oliver Hart said that financing deficits by printing money can lead to hyperinflation "once the economy is close to full capacity". What does he mean?

(Asked by: username_0 on 2021-01-11)

In response to a [poll](https://www.igmchicago.org/surveys/modern-monetary-theory/) on Modern Monetary Theory, Nobel Laureate [Oliver Hart](https://www.nobelprize.org/prizes/economic-sciences/2016/hart/facts/) said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation once the economy is close to full capacity".

What does he mean by the economy being close to full capacity?

**Tags:** inflation, currency, money-supply, government-debt, money


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## 1 answers

### Answer by username_1 on 2021-01-11. Score: 2 | Accepted answer

Full capacity means utilization of all resources in economy. That is all labor, capital and other resources are already used at their best uses. Economy will not always work at its full potential for various reasons. For example, due to fall in aggregate demand during recession, which can cause unemployment to be above natural rate.

Monetary policy or fiscal policy can stimulate economy but only to the point economy reaches full capacity (i.e. all resources are put to their best uses). After that point as Hart mentions monetary stimulus will likely lead just to inflation or potentially hyperinflation.

> **Comments:**
> **username_0**: Thank you, again as insightful as ever!  
> **username_0**: Sir/Madam, if/when free, please also consider answering this: https://economics.stackexchange.com/questions/42064/why-dont-governments-do-away-with-the-optics-of-taking-on-debt-against-new-curr  

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