Marshall states that money, or currency, is desired as a means to an end, but it does not follow that the larger the means to a certain end, the better that end will be achieved. Money is desired because having it gives a ready command of general purchasing power in a convenient form. An increase in the amount of a country’s currency will, all else being equal, lower proportionately the value of each unit. A country’s demand is not for a certain amount of currency, but for an amount of currency which has a certain purchasing power.
The values of gold and silver are not artificial but are governed on the side of supply by the cost of attainment, and on the side of demand by the needs of people for ready purchasing power based on gold and silver, together with the demand for these metals for the purposes of industry and display.
To discover the causes that govern the rapidity of circulation currency we must look to the amounts of purchasing power which the people of that country elect to keep in the form of currency. There is a certain volume of their resources which people of different classes care to keep in the form of currency, and all else being equal, the total currency is directly proportional to the level of prices.
People with similar incomes keep different amounts of income on hand due to differences in occupation and temperament.
Although the purchasing power of a unit of currency varies, all else being equal, inversely with the number of the units, an increased issue of inconvertible paper currency may lower the value of each of the units more than in proportion to the increase of their number.
Currency “differs from other things in that an increase in its quantity exerts no direct influence on the amount of the service it renders” (Marshall).
Marshall, A. "The Total Currency Needed by a Country." Marshall, A. Money, Credit and Commerce. Macmillan, 1924. 38-50.
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