The money supply in the making of inflation and deflation as well. Of course such factors are used to determine the level of prices in an economy.

With this money supply there is more liquidity in the consumption and the production processes. As is evident from the Quantity Theory of Money MV = PQ an increase in the stock of money ‘M’, at a constant velocity ‘V’, the resultant will be an increase in the price level ‘P’ with ‘Q’ constant. In a nutshell, yet more money is thrown after the same quantity of goods and services and demand goes further up and up goes the prices and inflation. 

But with most instruments, a central bank also increases money stock through open market operations, reducing interest rates to encourage even higher consumption and investment to bring in easy, demand-led inflation.

This is because when money supply is reduced more money is left in the central bank than circulating in the economic market reducing the consumers’ expenditure and businesses investment thereby lowering the aggregate demand hence deflation. Because price level has a tendency to go down as time goes on; low demand consequently reduces the price level hence deflation.

Aggressive deflation would be a bane to the corporate revenues and also send the economy into stagnation because the consumers wait for cheaper products to be released

Corev, more central banks monitor this money supply and adjustment to a middle position is done to control inflation and avoid both deflationism and inflationism for economy steadiness.