In this case shoe production, thereby the shoe supply, increases by 2% each month, causing the price of shoes, in units of wheat, to decline each month. It means that it will require fewer and fewer bushels of wheat to buy each pair of shoes (the red line).

At the same time the price of wheat, in units of shoes, increases. In other words, it will require more and more pairs of shoes to buy each bushel of wheat (the blue line).

Note: Please don't let the fractional units distract you; they would not trade 0.365 pairs of shoes. This exercise focuses on concept.

The exchange ratios remain reciprocal throughout the 60 month period.

For example, in month 30:

the Shoe to Wheat price equals 0.52 pair/bushel

the Wheat to Shoes price equals 1.92 bushel/pair

1/0.52 = 1.92

1/1.92 = 0.52

These reciprocal relationships remain consistent through the rest of these examples. (Please allow for rounding.)

Note: Keep these relationships in mind. These direct exchange ratios remain the same throughout, even though the other diagrams reflect only changes in the quantity of money