movements.--Section
3. The direct and indirect effects of upward price movements upon
the distribution of the product.--Section 4. The direct and
indirect effects of falling price movements upon the distribution
of the product.--Section 5. The doctrine of the "vicious circle of
wages and prices" examined. Its meaning and importance.

1.--Up to this point the investigation of the forces which govern wage
incomes has proceeded with only the most incidental acknowledgment of
the fact that the whole series of processes which is described as
production and distribution is performed with the aid of a monetary
system. Production entails a constant comparison and calculation of
money values. The transactions of distribution likewise. How does the
intervention of a monetary system affect the outcome of distribution?
How does it modify the share of the wage earners in the total product of
industry? The subject of prices and price levels is one of the most
difficult of economic subjects. However, our purposes do not require any
inquiry into the general theory of the subject. It will suffice for us
merely to recognize the existence of different types of price movements,
without investigating except at particular points the conditions which
govern them.

2.--It is common practice to use the term "price level" to denote the
position of prices of commodities in general. The price level is never
anything more than the concept of a collection of prices of particular
commodities. It is convenient to be able to express the position of this
collection of prices by a single figure. To do this, use is made of
various statistical devices by which this collection of prices can be
combined into one price--which will be statistically representative of
the collection. That single figure is known as the Index Number of that
collection of prices. Changes of the Index Number represent changes in
the position of the collection of prices from which it has been
statistically derived.

All price changes are changes in the prices of particular commodities.
Of course, a change in the price of one commodity may produce a change
in the prices of other commodities. Relatively small and occasional
changes in a few, or even in a great many of the prices which make up
the price level, have no importance for the problem of wages. Indeed, if
the price level remained nearly stationary there would be no necessity
of undertaking this