(3) It cannot be applied as a per capita rule to the same country through a series of years, without taking account of the many changing factors.  It is estimated that in 1800 the money stock was about $5 per capita in the United States, and in 1914 about $35[8], but average prices have not necessarily changed in the same ratio.  In a period of years a country may change in a multitude of ways, in complexity of industry, modes of exchange, transportation, wealth, and income.  These changes require, some larger, others smaller, per capita amounts of money to maintain the same level of prices.  For example, the substitution of cash payments for book-credit in retail trade calls for a larger per capita stock of money; whereas an increased use of banks and checking accounts, by economizing the use of money, enables a smaller amount of money to maintain the same level.[9]

(4) Tho applied originally to standard money, the quantity theory applies to all other kinds of money circulating side by side and at a parity of value, so far as these fulfil the definition of money and are not merely supplementary aids of money.  These substitutes for, or supplements to, money enable each dollar to do more work, to circulate more rapidly.  If the standard money alone were doubled in quantity, while the various forms of fiduciary money (smaller coins, bank notes, government notes) remained unchanged, the quantity of money as a whole would not be doubled.  Indeed, in such a case, the method of exchange would be greatly altered.  According to the quantity theory, therefore, prices would not be expected to double.

Sec. 12. #Practical application of the quantity theory#.  Despite the number of changing factors affecting the methods of exchange and the amount of business, the quantity theory is a rule unable at any moment.  These various factors change slowly, and the quantity theory answers the question:  What general change occurs in prices as a result of the increase or decrease of the money in a given community at a given moment?  Like the law of gravitation and the law of projectiles, the theory must be interpreted with relation to actual conditions.

The quantity theory makes intelligible the great and rapid changes in prices which have followed sudden changes in the quantity of money.  Inductive demonstration of broadly stated economic principles is usually difficult, but there have been many “monetary experiments” to teach their lessons.  Many inflations and contractions of the circulating medium have occurred, now in a single country, again in the whole world; and the local or general results have helped to exemplify richly the working of the quantity principle.  With the scanty yield of silver and gold mines during the Middle Ages, prices were low.  After the discovery of America, especially in the sixteenth century, quantities of silver flowed into Europe.  The great rise of prices that occurred was explained by the keenest thinkers