of monetary prices. We have the idea of a general level of prices
whenever we contrast the price ratio of money to other commodities at
one time with its ratio at another time. Now the monetary prices
of the various commodities are constantly changing, and in somewhat
different degrees, but on the average there may be a general trend
upward or downward, and this is called a change in the general scale
(or level) of prices, as contrasted with changes in the values of any
two commodities in terms of each other. The general price level will
be more fully discussed below (Chapter 6, section 3) in connection
with the method of measuring by index numbers its changes. This brief
explanation may, perhaps, be enough for our present purpose. Our
question now is: What is the effect of changes in the quantity of
money (considered apart from chance accompanying changes) upon the
general level of prices?

§ 9. #Effect of increasing gold production#. Let us take a case where
gold is in general use as money, and where for some time there has
been no noticeable change in the amount of business, the methods of
trade, and the general scale of prices. What would happen when new
gold mines were found that were much easier to operate, and gold began
to be produced at a much more rapid rate than formerly? The amount
of gold as compared with other forms of wealth evidently would be
increased. What if all the increase went into the industrial arts? The
value of gold in its industrial uses would fall. Then a part of the
increase must be diverted to monetary uses. When any man, by reason of
the increasing gold supplies, gets a larger stock of money than he had
before, the proportion formerly existing between his use for money
and his monetary stock is altered. He has more money than meets his
monetary demand at the existing prices. As he seeks to reduce his
stock of money to due proportions by buying more goods, he thereby