quantity theory of money
Suppose a sealed island uses 100 gold coins to trade the same basket of goods every year. Now a ship dumps another 100 coins on the island, but the island still produces exactly the same goods. With twice the money chasing the same stuff, prices simply double — a loaf that cost one coin now costs two. Nothing real has changed; only the price tags. This thought experiment is the heart of the quantity theory of money: more money, by itself, mostly means higher prices.
The quantity theory of money holds that, over the long run, the general price level moves roughly in proportion to the quantity of money in circulation, assuming the speed at which money is spent and the volume of real output are reasonably stable. Its slogan is "inflation is always and everywhere a monetary phenomenon." Built on the equation of exchange (MV = PQ), it implies that if the money supply grows much faster than output, the excess shows up as inflation rather than as more goods.
The quantity theory is a powerful long-run truth — sustained, large inflations are indeed tied to rapid money growth, and every hyperinflation features a flood of new money. But economists debate it sharply for the short run, because its key assumptions (a stable velocity of money, output near its limit) often fail. In recessions, new money can sit idle as people and banks hoard it, so it need not lift prices at all. So treat the quantity theory as a sound long-run anchor, not a precise short-run forecasting tool.
If a country prints money so the money supply doubles, but its factories and farms produce no more than before, the predictable long-run result is that prices roughly double. The extra money buys nothing real — it just raises the numbers on every price tag.
Double the money with the same goods, and prices tend to double.
The theory holds well over the long run but not always the short run: it assumes velocity and output are stable, and in a slump new money can sit idle rather than raise prices.