chapter  V
7 Pages

THE QUANTITY THEORY

MONEY-THE QUANTITY THEORY T HE value of a unit of money, like the value of a unit of any other thing, is governed by influences operating through supply and demand, and is governed solely by influences operating through these channels. The exchange value

of a yard of cloth tends to fall with every increase in the supply of that cloth and to rise with every increase in its demand; similarly, the exchange value of the piece of stamped bullion known as the sovereign tends to fall with any increase in the supply of sovereigns or their substitutes and to rise with any increase in demand; in neither case can exchange value be affected except through the channels of demand and supply.