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if us decides to cover the budget deficit through money creation, what are the impacts?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 19CTQ: Explain how a shift from a government budget deficit to a budget surplus might affect the exchange...

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Question

if us decides to cover the budget deficit through money creation, what are the impacts?

Expert Solution

Step 1

Budget deficit is a situation where expenditure is higher than income. But covering expenditure through money creation is not a good idea.

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