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Yune 1924 NUMBER 3 THE QUANTITY-THEORY OF MONEY I If price is the quantity of the standard money for which a commodity will exchange, there are two terms to the price ratio, and two sets of forces affecting price: (i) those touching the standard, and (2) those touching the demand and supply of goods. Assuming the usual functions of money, it is obvious that price-making is related directly to the standard money; and that the various forms of money which act as media of exchange have no effect on the price-making process except as they may change the value of either term in the price ratio, the value of gold, or the value of goods. Of course, the value of no article is fixed solely by demand, ignoring the influence of supply; demand is always at a given price; and supply is offered at a price that in general will cover the competitive expenses of producing the commodity. The quantity-theorists, however, insist that prices are fixed by the forms through which demand is expressed; by the quantity of money, or credit, offered for goods, as contrasted with the volume of trade; and have no place in their formulas (e.g., MV+ M'V' = P * T) for the influence of expenses of production on prices. It is essentially a theory of purchasing power. In actual life, 265