"70 ECONOMIC PRINCIPLES

(ii.) The efficiency, or rapidity of circulation, of money.
(iii) The extent to which exchanges take place without
the use of money as an intermediary, or, as it is more briefly
=xpressed, on a credit basis.
(iv.) The volume of exchange-transactions.
{v.) The general level of prices.
(t need not be argued that, if all exchanges required
money as an intermediary, and the volume of exchanges as
well as the efficiency of money remained constant, the
variations in the general price-level would be in the same
sense as the variations in the money in circulation, and would
also be proportionate to them. This is merely stating a
truism. If more money is used to exchange the same
amount of goods, of the same kinds, each commodity must
be exchanging for more money, if all commodities are
equally affected, or, if not, the average level of prices must
be raised in the same proportion as the quantity of money
in use. If it be urged that the money would not be able to
be got into use, the objection need not trouble us much.
The history of trade sufficiently shows that available moneys
are brought into use, though, generally, some increase in
the volume of trade accompanies the rise in prices. This
increase, so far as it goes, utilises the increase of moneysupplies
 without requiring the aid of a rise of prices, but a
precise offsetting is not, in the nature of the case, to be
expected, and thus some residual effect may remain in a
change of price-level. The stimulation of the volume of
trade may outrun the increase of money-supply, or such
stimulus may arise from other causes, so that that supply
becomes inadequate to effect all the exchanges at the old
price-level. Either more money must be obtained, or the
volume of exchanges be checked, or prices fall on the average.
But if all the money is metallic, or, if paper be in use, if
increase of the paper be merely in the form of deposit
receipts for metal, the first alternative is excluded. The
second cannot be accepted as an explanation of general
applicability, for the volume of exchanges grows under the
stimulus of other causes than changes in the output of the
precious metals from the mines. Thus the third of the