To get some idea of whether such a general trend occurs, the algebraic sum of all the changes in the particular prices of a selected group of goods may be taken, and for convenience this may be reduced to an average price (by dividing the sum by the number of articles).  Such an average is called a general price and, when comparing it with the general price of another time, we speak of changes up or down in general prices, or in the general scale of prices, or in the price level.

When gold is the standard unit, its value is the converse of general prices; as prices go up the value of gold goes down, and gold is said to depreciate.  As prices go down, the value of gold goes up and gold is said to appreciate.  Rising prices mean falling value of gold (and at the same time falling purchasing power), and vice versa.

[Illustration:  FIG. 2.  INDEX NUMBERS OF PRICES.  The four series of prices here shown begin at different periods; the American in 1840 (Aldrich report 1840-1889 and Bureau of Labor from 1890 on); the English in 1846; the German in 1851; the French in 1857.  We have adjusted each of these series to a base of the average prices for 1890-1899, in accord with the basic period used by the American Bureau of Labor.

The reader must be on his guard against misunderstanding the diagram.  It does not represent the heights of the prices of the different countries compared with each other either at any one date or for the entire period.  For example, the heights of the lines at the year 1860, do not indicate that American prices were lowest and French the highest at that date, or, indeed, tell anything whatever directly on that point.  The various series of prices are compared within themselves, every year with the average of the prices for 1890-1899 in each country, respectively.  The only comparison allowable, therefore, between the several lines, is that between the fluctuations, both as to their times and as to their directions, both as to the larger tidal movements and as to the lesser wave-like movements within the business cycles.  The Figure does indicate that both American and German prices have risen somewhat as compared with the English and French prices, since the period before 1860.

This figure should be studied in connection with Figure 1, in ch. 4, sec. 9, on gold production.  The Figures indicate that the rapidly growing monetary use of gold offset a large part of the effects of increasing gold production between 1840-1860 and 1884-1914.  Between 1884 and 1896 prices actually continued to fall after gold production had begun to climb.  Likewise the growing monetary use of gold accentuated strongly the effects, between 1873 and 1883 of a comparatively small decrease in gold production.]