According to the quantity theory we must expect that, when conditions (1) and (2) remain fixed, the value of money will vary inversely as its quantity.

This quantity theory may be expressed in the formula P = MR/N when P is the symbol for price, or the general price level, N is (1) above, R is (2), and M is (3).
P, therefore, changes directly with either M or R, or inversely with N.[6] Sec.11.

#Interpretation of the quantity theory.# The quantity theory must be carefully interpreted to avoid various misunderstandings of it that have appeared again and again in economic discussion.
(1) It does not mean that the price level changes with the absolute quantity of money, independently of growth of population and of the corresponding growth in the volume of exchanges.
(2) It is not a mere per capita rule to be applied at a certain moment to different countries.

For example, Mexico may have $9 per capita and the United States $35, while average prices may not differ in anything like that proportion.

But in these two countries not only the amounts of exchanges per capita but the methods of exchange and the rapidity of the circulation of money differ greatly.[7] (3) It cannot be applied as a per capita rule to the same country through a series of years, without taking account of the many changing factors.