#Inflation stems from the creation of new money, which can occur through various means such as excessive monetary stimulus, deficit spending, or quantitative easing.
This influx of money can lead to misallocation of resources, as it encourages activities like producing unnecessary goods, increased consumption beyond sustainable levels, and speculative or unproductive investments.
Such actions distort market signals, fueling price increases across the economy. Consequently, inflation erodes purchasing power, distorts economic decision-making, and can hinder long-term growth prospects.
Thus, while moderate inflation is necessary for economic vitality, excessive creation of money can lead to detrimental consequences.