uld rise
one-fourth. There would be one-fourth more money, all of which
would be used to purchase goods of some description. When there
had been time for the increased supply of money to reach all
markets, or (according to conventional metaphor) to permeate all
the channels of circulation, all prices would have risen
one-fourth. But the general rise of price is independent of this
diffusing process. Even if some prices were raised more, and
others less, the average rise would be one-fourth. This is a
necessary consequence of the fact that a fourth more money would
have to be given for only the same quantity of goods. General
price, therefore, in any such case would be one-fourth higher.
The very same effect would be produced on prices if we suppose
the goods diminished, instead of the money increased: and the
contrary effect if the goods were increased, or the money
diminished. If there were less money in the hands of the
community, and the same amount of goods to be sold, less money
altogether would be given for them, and they would be sold at
lower prices; lower, too, in the precise ratio in which the money
was diminished. _So that the value of money, other things being
the same, varies inversely as its quantity; every increase in
quantity lowering the value, and every diminution raising it, in
a ratio exactly equivalent._

This is known as the quantitative theory of money, and is recognized
by Ricardo, Jevons, Macleod, John Locke, James Mill, John Stuart Mill,
Senator John P. Jones, David Hume, William Huskisson, Sir James
Graham, Prof. Torrens, Prof. Sidgwick, J. R. McCulloch, Mr. Gallatin,
Prof. Fawcett, Prof. Perry, N. A. Nicholson, Earl Grey, Prof. Shield
Nicholson, Lord Overstone, and, in fact, by all writers on political
economy of any prominence since Adam Smith. Formerly it was supposed
that the value of money depended upon the cost of production; that the
reason why a dollar in gold or silver was worth 100 cents was because
it took 100 cents' worth of labor to produce metal enough to make a
dollar. This theory, however, has been abandoned by the best writers
and speakers; in fact, by all economists of any standing, and it is
now conceded that the cost of producing the metal has no influence on
its money value, only as it may tend to increase or reduce the amount
of money, and that it is the quantity