• Different economic factors lead to the depreciation of the value of a dollar.Thomas Northcut/Photodisc/Getty Images
  
  The value of a dollar constantly moves up and down. Various economic factors affect the value of the dollar. Positive economic factors such as an increase in consumer spending cause the dollar to appreciate and negative economic factors such as a recession cause the value of a dollar to depreciate.
  
  

Inflation

• When the general prices of goods and services increase, it is an indicator of inflation. When inflation is on the rise, consumers have less purchasing power because the value of the dollar decreases when inflation increases. Consumers have to spend more money to purchase a good after inflation than they had to spend to purchase that same good before inflation. Inflation often leads to a decrease in consumer spending, which can indicate the onset of an economic recession. If an economy is currently in a recession, inflation and its subsequent decrease in consumer spending only work to prolong the recessionary period.
  
  

Increased Money Supply

• Increasing the economic money supply depreciates the value of a dollar because the supply is increasing faster than consumer demand for money. The government increases the economic money supply by either printing new money or by selling some of the securities in its investment portfolio. Introducing new money into the economy dilutes the value of the old money that is already circulating in the economy. This leads to an overall depreciation of the dollar.
  
  

Negative Economic Forecasts

• If a government and its economists forecast an economic slowdown or recession, the value of the dollar depreciates. During times of economic downturns, unemployment is generally on an overall decrease. When people lose their jobs, there is a decrease in disposable income and therefore a decrease in consumer spending. High unemployment rates also lead to a decline in a country's Gross Domestic Product or GDP. All of these factors contribute to the depreciation of a dollar during economic downturns.