Economics 14th Edition by James Gwartney,Richard Stroup, Russell Sobel ,David Macpherson

Exercise 5

What's wrong with this way of thinking? "When the government runs a budget deficit, it simply pays its bills by printing more money. As the newly printed money works its way through the economy, it waters down the value of paper money already in circulation. Thus, it takes more money to buy things. Budget deficits are the major cause of inflation."