Money Values and the Tariff
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. The foregoing is known as the Quantity Theory of Money. The important point in relation to a tariff is the term 'quantity of money'. The problem of the value of money in a country arises when two periods, or two places, are being compared, and is really the problem of two price levels. It is complex, but for the present purposes it will be sufficient to state that the price level or purchasing power of money is dependent on the quantity of money available and the total money transactions conducted. The double effect is to reduce the supply of foreign bills and inject British funds into the money market, for the sellers of the bills now have additional British currency.