Unlike in a real economy, there is no fixed amount of currency that circulates, but the amount of currency in circulation continuously increases - whenever a player sells an item to an NPC or receives ingame currency as a reward for a quest, this amount is added onto the money already in circulation, whereas in a real economy, this amount would not be conjured from thin air, but taken out of another entities funds.
Mudflation is very undesirable, as it makes gearing up significantly harder for new players.
Popular Anti-Mudflation mechanisms include ingame mail fees, auction house fees, repairs, upgrading or refining fees or consumables.
More recent East-Asian MMORPGs often have a tendency to have too efficient Anti-Mudflation mechanisms, causing players to become "poorer" as they progress in the game.
Bob receives 10 Gold which the game has just created.
Money in circulation: XXXX Gold + 10 Gold -> Mudflation
Bob sells a can of Red Bull to Joe.
Bob receives 2 Dollars, Joe loses 2 Dollars.
Money in circulation: unchanged