#money_banking/money_theories Summary:: # Notes --- # References --- # Drafts --- --- # Publication # Role of Money Although the primary role of money consists of acting as a medium of indirect exchange, it's role extends into other levels of economic activity. ## Money as Proxy Money does not act as a measure of value, but it does act as a proxy or an indicator of value. Thus, it plays an important role in economic calculation. ## Money Prices Money prices provide an important indicator of economic activity. It is important, however, to note that the only thing that can be accounted for is the quantity of money transferred. ### General Prices General prices respond only to the quantity of money. With a fixed quantity of “money” general prices would stay relatively stable. ### Price Inflation General prices increase as a result of the increase in the quantity of money and the influence of that increase spreads from good to good throughout the economy. ### Price Deflation General prices decrease when a rare decline in the quantity of money occurs.