“No, the price of the dollar in circulation would increase in value, like any other good in demand.”
Then it’s not based on the price of gold. Actually, this is how it already works. The price of the dollar does adjust. It’s merely that the Fed influences the money supply, and therefore has some ability to influence whether the price of the dollar adjusts upward or downward.
Now, the dollar is not tied to gold, but gold is rising in price to the decreasing value of the dollar since people still look to gold as money.
A gold backed currancy would prevent the Fed from destroying the dollar by inflation.
There is always enough money in circulation since money just rises in value if there is less of it and lowers in value if there is more of it as it relates to the goods it can buy.
In other words, a dollar that is worth a dollar (in gold) will go alot further then a paper dollar worth only 10cents.