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The difficulties in the way of maintaining effective demand at a level high enough to provide full employment, which ensue from the association of a conventional and fairly stable longterm rate of interest with a fickle and highly unstable marginal efficiency of capital, should be, by now, obvious to the reader. Such comfort as we can fairly take from more encouraging reflections tory burch sale outlet must be drawn from the hope that, precisely because the convention is not rooted in secure knowledge, it will not be always unduly resistant to a modest measure of persistence and consistency of purpose by the monetary authority. Public opinion can be fairly rapidly accustomed to a modest fall in the rate of interest and the conventional expectation of the future may be modified accordingly; thus preparing the way for a further movement up to a point.

The fall in the longterm rate of interest in Great Britain after her departure from the gold standard provides an interesting example of this; the major movements were effected by a series of discontinuous jumps, tory burch handbags as the liquidity function of the public, having become accustomed to each successive reduction, became ready to respond to some new incentive in the news or in the policy of the authorities.We can sum up the above in the proposition that in any given state of expectation there is in the minds of the public a certain potentiality towards holding cash beyond what is required by the transactionsmotive or the precautionarymotive, which will realise itself in actual cashholdings in a degree which depends on the terms on which the monetary authority is willing to create cash. It is this potentiality which is summed up in the liquidity function L.

Corresponding to the quantity of money created by the monetary authority, there will, therefore, be cet. par. a determinate rate of interest or, more strictly, a determinate complex of rates of interest tory burch boots on sale for debts of different maturities. The same thing, however, would be true of any other factor in the economic system taken separately. Thus this particular analysis will only be useful and significant in so far as there is some specially direct or purposive connection between changes in the quantity of money and changes in the rate of interest.