ABSTRACT
Introduction The main purpose of the present chapter is to introduce a number of ideas that will prove useful at various points throughout this book by considering the determination and behaviour of the general price level in a highly restricted model of economic exchange. The model is highly artificial, but an examination of the rather abstract world that it represents will enable us to assoniate more rapidly at a later stage theories of the general price level that bring us closer to reality. In effect we shall extend the simple idea of the law of supply and demand to a world of many commodities and money. We shall find that a number of problems that arise in this simplified world recur in more complicated pictures of how the economy works.
