Why does the government try not to respond to a budget deficit by increasing the amount of money in circulation?

because it can cause inflation.

Explanation:

Inflation is defined as the consistent and persistent rise in general prices of goods and services as a result of too much of money in circulation.

Budget deficit is when the expenditure incurred by the goverent exceeds revenue generated. When this occur, government might be forced to create more money which will be used to pay salaries hence increase the volume of money in circulation. This will also bring increase in demand by households and output will also increase by firms thereby causing inflation.

Budget deficit can be corrected by government through sales of bond, treasury bills and treasury notes. Through these sales, volume of money in circulation is mopped up hence increase revenue accruable to the government.

Government can also increase tax levied on firms and certain individuals in order to create more revenue hence reduce inflation. The government can also cut its public spending inorder to reduce it's fiscal limit.