As economic activity increases, we see an expansion, the first phase of the short-term debt cycle, spending continues to increase and prices start to rise. This happens because the increase in spending is fueled by credit, which can be created instantly out of thin air. When the amount of spending and incomes grow faster than the production of goods, prices rise.When prices rise, we call this inflation. The central bank doesn't want too much inflation because it causes problems. Seeing prices rise, it raise ...