Let’s discuss the true nature of the relationship between money supply and inflation/deflation. Imagine an island inhabited by a handful of people. They all work at the coconut tree farm, tending and harvesting coconuts and putting them in the barn for later purchase. For each day’s work, they get a seashell which they take home and put in their sock drawer. This is their island’s currency, which they will later use to buy coconuts. 

At some point, they each go to count their seashells, and they each find half as many as they expected. Instinctively, they spend fewer shells, as they now find their shells scarce and more valuable. In response to this reluctance to spend, the coconut sellers lower prices to encourage sales of coconuts. When the scarcity of a currency increases (and thus, its value), people will hold it more, precipitating a decrease in prices. This is deflation.

They eventually realize that pack rats were raiding their stashes of shells, and each islander lost exactly half of their shells to the animals. They decide to return things to how they were before by breaking each of their remaining shells in half, returning home, and putting them back in the sock drawer. However, when they broke the shells, they weakened them structurally so that each of the shell halves they put into their sock drawer broke in two again on their own while no one was watching. 

Later, when the people count their shells, they find more than expected. With their larger than expected buying power, they spend more freely. The coconut sellers respond to this increase in demand by raising prices to maximize profits. This increase in prices and corresponding devaluation of currency is inflation.

Throughout these scenarios, everyone’s buying power ostensibly remained the same, even though their perception of their buying power went through some changes. When everyone’s money was cut in half and their spending slowed, prices dropped until they could buy as much output as they originally could have. When everyone’s money was presumably doubled, but unexpectedly quadrupled, prices raised until they could only buy as much output as they originally could have. This is because they’re not really buying the coconuts with the seashells, they’re buying the coconuts with what the shells represent, which is the person-hours of labor they imparted into the coconuts. The number of hours they put into the coconuts hasn’t changed, and the number of coconuts that labor produced hasn’t changed either.