chapter  III
Pages 14

MONEY is said to be a measure of value and a medium of exchange; but it is very elastic as a measure, for its units are capable of variation irrespective of changes in the values to which they are applied. Some of these variations arise spontaneously from the operation of trade, production, and so on, through errors in anticipating the future, and from natural causes such as bad harvests. Other variations are induced artificially by governmental or bank activity. The price and income structure of a country at any moment of time is expressed in the units of its currency. When, therefore, we contrast the units of one currency with those of another, we are at the same time comparing their respective price and income structures. If the currency of one country changes in value in relation to that of another country it implies a change in these structures relative to each other, unless there is some specific reason to the contrary. Taxation in general is bound up with such movements, for it causes shifts in prices, in demand, and in individual incomes. Ad valorem taxes, whether customs or excise, are particularly affected from the point of view of revenue, though any special effects due to the ad valorem nature of the taxes might be nullified when the revenue is spent. Customs ad valorem duties are further affected by the actions of foreign nationals as well as those of the domestic government, for example, when variations in value, or their prevention, are brought about by such artificial means as currency restrictions in liquidating debts, or the operation of exchange equalization funds.