N. Gregory Mankiw’s Principles of Macroeconomics, Essay Example

By increasing the supply of money, the United States of America government had to borrow money from the external sources and hence increased the national debt.

Increase in the national debt called for an increase in taxation, and hence affecting the economy it was trying to salvage from the recession.

Every dollar that the U.S government injected in to the economy was taxed. Therefore, the money that was availed to the people was less than 100% because of the tax and hence this could not automatically end recession at once.

Therefore, this supply could not improve the GDP of the American citizens, as no significant value that was added. Money was borrowed and injected into the enhance demand and production that did not succeed since the government debts to other countries and institution and taxation increased hence emptying the people’s pockets. The same money that was supplied to the economy was fast taken away.

The supply of external money in the economy leads to rise in the inflation rates, as there is more demand for commodities than the supply. People having money in their pockets tend to spend much and hence the prices of the commodities raise leading to inflation in the end.

Works cited

Mankiw, N. G. R. E. G. O. R. Y. Principles of macroeconomics. Cengage Learning, 2014. Print.