Question is often raised as to the definitive theory of prices as generally held at the present moment. The subject is still one as to which controversy exists among economists and theorists. Without attempting to go into this controversy in any detailed way or to discuss the more difficult points of abstract theory, we may fairly state certain points bearing upon the theory of prices which can be regarded as of general acceptance.

1. Definition. Price is the monetary expression of the value of commodities, or, in other words, it is the value of commodities expressed in terms of money; it is the ratio between commodities and money.

2. Prices are the result of a comparison of the supply of and demand for goods and money; they rise or fall according to increase or decrease, relatively speaking, of demand or supply of the various factors entering into the comparison.

3. Money constitutes a demand for goods. An increase in the actual volume of money in existence, therefore, tends to raise prices if there are no offsetting factors. Conversely, a decrease in the volume of money has the opposite effect.

4. Goods constitute a demand for money or for other goods, and an increase in them tends to lower money prices accordingly.

5. Credits on the books of banks - deposits - are theoretically claims to money and they may be regarded as constituting a demand for commodities in the same way that money is a demand for commodities.

6. An increase in the total outstanding quantity of bank credit is thus potentially a demand for commodities which may tend to raise the price of commodities, but only if it is used in actual purchases.

7. In the same way a decline in the total volume of bank credit outstanding may tend to curtail the amount of demand for commodities and may thus tend to lower prices.

8. The question whether an increase in the volume of money or bank credits will or will not affect the prices of goods depends upon several factors which influence the activity of money and credit and which determine the direction in which the purchasing power shall be exerted. It is not true, as is sometimes supposed, that the purchasing power rendered available by a bank which grants deposit credit is exerted practically equally over the whole field of business or goods. 9. At any given moment the analysis of causes of price changes involves a considerable number of factors any one of which may have become more or less important during the immediately preceding period. The analysis or statement of the price equation at any given time is thus tentative, and can be made absolute only in given cases as the result of study and the elimination of changing factors.