Prices and the Quantity of Circulating Medium, 1890–1921

Abstract

An attempt to find a method for forecasting price changes develops important theoretical conclusions. — The quantity theory of money furnishes a basis for an hypothesis (229), a test of which requires an index number of general price level, an index number of total circulating medium, and an index number of the normal value of V/T , 234. — The reciprocal of the latter is an index of the circulating medium necessary to maintain a constant price level, 239. — From the index number of circulating medium and the index number of the normal value of V is calculated an index number of normal price level, 000. — This index number compared with the index number of actual price level, 1890–1916, shows a good correlation with a lag apparently slightly less than one year, 242; which substantiates the original hypothesis, as applied to that period, 245. — The hypothesis, however, does not explain the price changes of 1917–20, 246. — Some related conclusions, 248.— Supplementary note, 252. — Appendix: Construction of the index number of circulating medium, 253.