Why does printing more money cause inflation?
Why does printing more money cause inflation? The explanation I always get is that "printing more money doesn't increase supply of goods & services; it just spreads the money supply over the existing goods & services". So what that implies to me is that it would be okay to print more money if the amount of goods/services/businesses increased. But how does the U.S. mint (or whoever prints the money) keep track of that with new services and businesses opening up every day. So should the money supply equal the total price of the amount of products produced by a country? How would that work for skills/non-physical commodities (like doing yardwork or teaching/tutoring). But then if there is more of a product, then the value decreases because there's more of it, so why would there need to be more money printed?
So what is price based on? I know the typical answer is supply & demand but that doesn't really explain the grander context. There is a finite amount of money at any given time, so obviously you can't price your good or service at more than the money supply because obviously no one will be able to afford it. So what happens if the total amount of goods & services (including competition) totals up to over the money supply? So like, for simplicity sake... let's say there's only 2 businesses in a country (which at one point in early history had to have happened) and the supply of currency is 1,000. Let's say business A offers a service at 1,000 (after all, at this time, it's the only business so all the money can only go to that business), but then business B comes along and offers that same service at 900. now people are going to buy from there. The total cost of the 2 services (1,000 + 900) equals 1,900. Ideally, according to the economics textbooks I've read, the money supply should be able to buy all the country's output. In this country that only has 1,000 of their currency, how could it buy all the services, which, combined, cost 1,900?
So is price based on scarcity, what people can afford, or is it a fraction of the money supply? I've heard all 3
Thanks to anyone in advance who can help me figure this out!