Many people speak with great confidence about inflation, the money supply and "econ 101". Most of those with the greatest confidence in their own knowledge are not familiar with the fundamental equation of exchange, MV=PQ.
Here, M is the money supply, V is the velocity of money, P is the price level, and Q is the real quantity of goods and services.
It's easy to see that if M increases and Q increases the same amount, then if V is constant, P will also hold constant.
Or if Q is constant and a decrease in V offsets the increase in M, P will again hold constant.
Increasing the money supply by printing money does not automatically cause prices to increase, because there are other variables in the equation.
Here, M is the money supply, V is the velocity of money, P is the price level, and Q is the real quantity of goods and services.
It's easy to see that if M increases and Q increases the same amount, then if V is constant, P will also hold constant.
Or if Q is constant and a decrease in V offsets the increase in M, P will again hold constant.
Increasing the money supply by printing money does not automatically cause prices to increase, because there are other variables in the equation.