It will illustrate the “Quantity Theory” equation in general and the phenomena of deflation and inflation of real balances in particular, if we endeavour to fill in actual values for our symbolic quantities. The following example does not claim to be exact and its object is to illustrate the idea rather than to convey statistically precise facts. October 1920 was about the end of the recent boom, and October 1922 was near the bottom of the depression. At these two dates the figures of price level (taking October 1922 as 100), cash circulation (note circulation _plus_ private deposits at the Bank of England[23]), and bank deposits in Great Britain were roughly as follows: [23] It would take me too far from the immediate matter in hand to discuss why I take this definition of “cash” in the case of Great Britain. It is discussed further in Chapter V. below. Price Level. Cash Circulation. Bank Deposits. October 1920 150 £585,000,000 £2,000,000,000 October 1922 100 £504,000,000 £1,700,000,000 The value of _r_ was not very different at the two dates--say about 12 per cent. Consequently our equation for the two dates works out as follows[24]: October 1920 _n_ = 585 _p_ = 1·5 _k_ = 230 _k´_ = 1333 October 1922 _n_ = 504 _p_ = 1 _k_ = 300 _k´_ = 1700 [24] For 585 = 1·5(230 + 1333 × ·12), and 504 = 1(300 + 1700 × ·12). Thus during the depression _k_ rose from 230 to 300 and _k´_ from 1333 to 1700, which means that the cash holdings of the public at the former date were worth 23/30, and their bank balances 1333/1700, what they were worth at the latter date. It thus appears that the tendency of _k_ and _k´_ to increase had more to do, than the deflation of “cash” had, with the fall of prices between the two periods. If _k_ and _k´_ were to fall back to their 1920 values, prices would rise 30 per cent without any change whatever in the volume of cash or the reserve policy of the banks. Thus even in Great Britain the fluctuations of _k_ and _k´_ can have a decisive influence on the price level; whilst we have already seen (pp. 51, 52) how enormously they can change in the recent conditions of Russia and Central Europe.