[51]It is interesting to make a quantitative comparison of the various magnitudes with the increase in the quantity of money as the most important factor in raising the price level. While it is true, as shown by the diagram, that the volume of deposits subject to check has increased greatly, the major part of the increase has to be ascribed to the increase in the quantity of money. Only so far as the volume of deposits subject to check has increased relatively to the money in circulation, can the increase of deposits be regarded as an independent cause of the rise in prices. We have thus to consider the relative importance of the five causes affecting prices: 1. The quantity of money in circulation (M). 2. The volume of bank deposits subject to check considered relatively to money (M'/M). 3. The velocity of the former (V'). 4. The velocity of the latter (V). 5. The volume of trade (T). We may best compare the relative importance of these five magnitudes by answering the question: What would the result have been had any one of these magnitudes remained unchanged, assuming that the other four changed in the same manner that they actually did change. We find (1) that if the money in circulation, M, had not changed, between the years 1896 and 1909, for example, the price level of 1909 would have been 45 per cent. lower than it actually was; (2) that if M'/M, the relative deposits, had not changed, during the same period the price level in 1909 would have been 23 per cent. lower than it actually was; (3) if the velocity of circulation of money, V, had not changed, the price level for 1909 would have been 1 per cent. lower; (4) if the velocity of circulation of deposits, V', had not changed, the price level in 1909 would have been 28 per cent. lower; (5) if T had not changed, the price level in 1909 would have been 106 per cent. _higher_. Thus the changes in the first four factors have tended to raise prices, while the change in T has tended to lower prices. The relative importance of the four price-raising causes may be stated in terms of the per cent. already given which represents how much lower prices would have been except for each of these causes separately considered. According to this test we find the relative importance of the four price-raising factors to be as follows: The importance of V is represented by 1, The importance of M'/M is represented by 23, The importance of V is represented by 28, The importance of M is represented by 45. That is, the increase in the quantity of money had an importance nearly double that of any other one price-raising factor, during the period mentioned. INDIRECT INFLUENCES ON PURCHASING POWER[52]