Price level

Price level is a concept which implies that all prices rise and fall uniformly with changes in the quantity of money or the total of goods and services offered for sale, somewhat as the level of a liquid rises and falls with changes in its quantity or the size of its container. Actually, the term "price level" usually refers to an average of selected prices which individually move quite differently from each other and their average. Acting men are more interested in the interrelationship of different prices than in the movement of all or average prices. When all, or almost all, prices move in the same direction, it is usually a sign of inflation or deflation. Continued use of the term "Price level" frequently leads to the notion of the neutrality of money.