When new money or credit is added to an economy, thus diluting the existing supply, the general level of prices (aggregate prices) will rise, assuming the amount of goods and services within the system stays the same." This dilution causes the banks to raise rates to cover the devaluation. More dollars are required to buy a given quantity of goods. The dollar value is diminished. Inflation is monetary expansion: more money chasing a diminish supply of goods and services. "Anything that artificially increases aggregate demand for goods and services is inflation." The demand is artificial because it does not result from increased productivity, but from inflation. Inflation is paying today's debts with cheaper money in the future. The result is that prices rise. In true economic growth, price fall, as increases in productivity output raise the supply of goods relative to the supply of money.
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