Budget deficits are inflationary in the monetarist framework only to the extent that they are monetized. Tight money may lead to an unsustainable debt finance process and thus higher inflation in the long-run. In a closed economy, public deficit must be matched by private surplus, or vice versa.
Budget deficits are inflationary in the monetarist framework only to the extent that they are monetized. Tight money may lead to an unsustainable debt finance process and thus higher inflati…