ed into coin or the coin melted down into
metal.

This adjustment of the value of commodity-money to other things is
made also on the side of supply, in the use of labor and material
agents to produce the precious metals and to produce other things.
Gold-mining, for example, is one among various industries to which men
may apply their labor and their available material agents. Some mines
are superior, others medium, others marginal which it barely pays
to work. There is, therefore, a rise and fall of the margin of
gold production with changes in prices and changes in the cost of
production. Large new deposits of gold are discovered from time to
time and new methods of extracting gold are invented. If, when it
barely pays to work a mine, such changes occur, gold becomes worth
less, and the poorer mines eventually must go out of use. As gold
rises in value some abandoned mines again come into use. A similar
variation may be noted in the utilization of marginal land, marginal
factories, marginal forges, and marginal agents of every kind.[5]

Sec. 8. #The general level of prices#. We come now to a more peculiar
aspect of the monetary value problem. In performing its function
as general medium of trade, money determines the general level
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?

Sec. 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