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anticipate their purchases ; and also a direct effect,which is less likely to be significant, on the price-levelof liquid consumption-goods in so far as the rate ofsavings is affected.
2. The change in P' thus brought about will upsetthe balance between investment and saving, whichwill, as a secondary effect, cause P to move in thesame direction as P'—whether or not it has done soalready as a consequence of a change in the rateof saving—with the result that the profits of entre-preneurs producing consumption-goods will move inthe same direction as the profits of those producingcapital-goods.
3. The change in the average rate of profits,whether it is due to P' or to P, will alter the volumeof employment which entrepreneurs will be preparedto offer at the existing rate of earnings.
4. A tendency will, therefore, be set up to changethe prevailing rate of earnings in the same directionas P and P' and in the opposite direction to bank-rate.
(iii.) Some Special Aspects of Bank-rate
There are certain special points arising out of theabove, which must be noticed before we pass on :
1. A change in the other factors of the situationmay sometimes involve an inevitable instability unlessthere is an anticipatory change in the bank-rate. Fora fall in the bank-rate required to stimulate invest-ment so as to balance increased saving must—when-ever the increased investment takes the form of anincreased output of fixed capital —precede the increaseof saving by an interval dependent on the length ofthe productive process. Moreover, the anticipatorychange in bank-rate must also be correctly under-stood by the business world ; otherwise it may stimu-late the producers of capital-goods without any cor-responding readiness on the part of the producers of
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