At its core inflation is caused by too much money in circulation compared to aggregate demand in any given economy A rise in the amount of money in circulation is only necessary when there is an increase in productivity gains at par with the new amount injected into the economy Similarly the value of the fiat currency decreases if the aforementioned conditions are not met For example if a nation owes its creditors lots of money it can simply print more money The original debt is paid off but the currency received has less value