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not, indeed, be quantitatively important, except ongoods of which the future yield will be spread over avery short period, unless the bond-rate is sensitive tochanges in bank-rate. But this is, in fact, the case,and in a higher degree than might have been expected.If, for example, a rise of 1 per cent, in bank-rate hasthe effect of raising bond-rate from 5 per cent, to 5| percent., this means an average decrease of 2 \ per cent,in the price of new fixed capital—the prices of somecategories of such goods falling, of course, more thanthe average and those of others less, according totheir length of life and other considerations. Thismust necessarily be deterrent to the production ofsuch goods, until, as a result of it, the falling off intheir prospective supply has raised the money-valueof their prospective yield sufficiently to offset theeffect of the higher rate of interest. At any rate, theinitial consequence of a higher bank-rate will be afall in the price of capital-goods, and therefore inP', the price-level of new investment-goods. More-over, the deterrent or attractive effect on the demandfor new capital-goods is often greater than one mightexpect if one was to concentrate all one’s attention onthe mere change of (say) 2 \ to 5 per cent, in the valueof such goods due to the change in the rate of interest.For investment is much more capable of postponementor anticipation without serious disadvantage (or is so,at least, in the minds of those who make the decisions)than is consumption. If, therefore, the change inbank-rate is considered by the market to be a departurefrom its normal value, which is likely to be of a tem-porary character, the effect is to cause borrowers forinvestment purposes to put off or to anticipate theirinvestment plans, and thus to cause the immediaterate of investment to fluctuate much more than wouldbe the case if borrowers believed that the change inthe rate of interest had come to stay. The actualorganisation of the market is also an influence in the