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Why do governments sometimes pay for their spending by printing more money? Why do economists refer...

Why do governments sometimes pay for their spending by printing more money? Why do economists refer to this as an ‘inflation tax” that can result in very harmful results?

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When there is no source for the government to borrow the money to pay for the spendings, then, in that case, the government knocks the door of the central bank, and the central bank of the economy provides the funds to the government by printing more money. When central bank prints more money it will increase the money supply, and it will lead to inflation in the economy that is why economist refer to this as inflation tax, and this can be harmful to the economy because it will lead to an increase in the overall price level in the marketplace. It may hurt the central bank's target of controlling inflation.

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