Basic Reason of Why the Money Supply Needs to Increase? Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows.  My question is not asking why inflation happens, but rather focuses on the money supply. I grasp how increasing the money supply tends to increase inflation, and how, on the other hand, the Real GDP increasing tends to decrease inflation (all this is bundled up in the MV = PY equation) and other higher-level economic concepts, but why does the money supply need to increase at all in the first place? 

I am essentially asking what would be wrong with keeping it the same as the economy grows or contracts. 
The colorful analogy found here helped me understand it a bit more, but I am still thoroughly confused.
Actually, the expression more money supply is not clarifying at all (i) which effect is desired and (ii) what really occurs, whence your (really natural) question.

What is implicit behind this expression is that commercial banks will have an easier access to (re-)financing. If commercial banks play their role of Money multiplier -- which is not that obvious since they may prefer to clean their balance sheets --, they will basically be more prompt to grant credits. Put differently and using an abusive but pedagogical term: they will be psychologically more prompt to waste money, and thus to stimulate demands here and there. 

Since growth is very often conceived as being demand led, more demands (of goods or whatever) at a constant level of supply (of those goods or whatever) in turn means inflation, until levels of supply, here and there, adjust and create jobs, generate dividends, etc...

To conclude and summarize


  Basic Reason of Why the Money Supply Needs to Increase?


Because one needs commercial banks to be more relax and play their role.


  what would be wrong with keeping it the same as the economy grows [...]


The economy cannot really grows without leverage.


  [...] or contracts


Bubbles may form and explode sooner or later in this case, which is nothing desirable.

Adjusting the money supply is a difficult balancing exercise for central banks.