It doesn't limit the size of the economy. It incentivises saving over investing, since the value of the currency tends to increase as the economy grows. Modern fiat currency is designed to disincentivise savings and incentivise investing, in order to supercharge economic growth.

A counter-position from the Austrian/Chicago school is that supercharging growth drives malinvestment, and they can't be entirely wrong about that - I've seen tons of dumb money flow into dodgy companies during tech booms.