Why does inflation occur with printing of money if the currency in question is not backed by gold or something like it?

Question

I ask this because I’m curious as to why the USD value plummets when they print more currency if it’s not even backed by precious metals anymore. Does it have something to do with GDP? I looked up what it’s backed by and it says something about the Federal Reserve that I don’t understand.

I’m taking economics right now and I think understanding this might help. Regardless, I’d like to know.

In: Economics

Answer 1

Inflation occurs not “when the value of a currency lowers due to increased amount” but rather “when the same number value of currency is increasing worth less goods and services” which is basically the same thing but a different way of thinking about it. If billions of dollars were printed and used, that money would make its way around the economy, spending would increase, prices would increase, as money continues to circulate, the price of everything would rise. Thus, the currency would be worth less.