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However, before we proceed further, it is best to understand what monetary inflation is and where it comes from. Monetary inflation basically refers to the government figuratively increasing the printing of money in printing presses so that there is more supply of currency in the market.
When the government increases the supply of money faster than the quantity of goods, we have what is known as inflation. The best part is the when the supply of goods increase, the money supply also has to increase or else the prices of goods will actually go down.
Cause and Effect of Inflation:
The major cause of inflation is the increase in supply of money by the government. Inflation has multifold effect and we will discuss just a few.
Inflation affects a country’s exports as the exports reduce but there is an increase in import penetration. This ultimately leads to a fall in the rate of economic growth and level of employment. As prices of goods increase because of inflation, immediately there is demand for high wages as workers try to maintain their real standard of living. Higher wages above any gains in labor productivity results in increase in unit labor costs. Therefore, to maintain their profit margins, companies in turn increase their prices and the entire process starts all over again and this can result in inflation getting out of control.
Inflation also causes a reduction in the real value of savings and this is especially true when it becomes real interest rates as they become negative due to inflation. This means that the rate of interest does not compensate completely for the increase in general price level. However, borrowers are benefitted by inflation as they see the real value of their debt reduce. This means that inflation favors the borrowers while harming the savers.
Inflation also leads to higher interest rates and causes disruption in business planning as the future becomes uncertain and this makes planning difficult. This can have adverse effect on the level of planned capital investment.
Another effect of inflation is felt by consumers and businesses with fixed incomes. Many pensioners received fixed pension each month and due to inflation the real value of their pension reduces year on year.
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Basically there are four main types of inflation and each type has different causes. The term inflation usually refers to rise in general price level but usually inflationary movements are restricted to any single price or group of prices 
