# INFLATION

By [Majk](https://paragraph.com/@majk) · 2022-08-30

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Most economists agree that high levels of inflation as well as [hyperinflation](https://en.wikipedia.org/wiki/Hyperinflation)—which have severely disruptive effects on the real economy—are caused by persistent excessive growth in the [money supply](https://en.wikipedia.org/wiki/Money_supply). Views on low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in [real](https://en.wikipedia.org/wiki/Real_versus_nominal_value_\(economics\)) [demand](https://en.wikipedia.org/wiki/Demand) for goods and services, or changes in available supplies such as during [scarcities](https://en.wikipedia.org/wiki/Scarcities).Moderate inflation affects economies in both positive and negative ways. The negative effects would include an increase in the [opportunity cost](https://en.wikipedia.org/wiki/Opportunity_cost) of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of [goods](https://en.wikipedia.org/wiki/Good_\(economics\)) as consumers begin [hoarding](https://en.wikipedia.org/wiki/Hoarding_\(economics\)) out of concern that prices will increase in the future. Positive effects include reducing [unemployment](https://en.wikipedia.org/wiki/Unemployment) due to [nominal wage rigidity](https://en.wikipedia.org/wiki/Nominal_rigidity), allowing the central bank greater freedom in carrying out [monetary policy](https://en.wikipedia.org/wiki/Monetary_policy), encouraging loans and investment instead of money hoarding, and avoiding the inefficiencies associated with deflation.

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*Originally published on [Majk](https://paragraph.com/@majk/inflation)*