78 
MONEY 
views of what it will be in the future, but we do not 
say that “ the price of sugar depends on confidence.” 
The supply being taken as fixed, how much will a 
given increase of demand send up the value of cur- 
rency ? The question is not so often asked as the 
corresponding question, “ How much will any given 
addition to the supply raise prices?” because we 
do not feel ourselves able to measure additions to 
the demand as easily as additions to the supply. 
But one example seems workable. Suppose that fo 
a country with a particular currency of its own there 
is added a new province one-tenth as large and with 
exactly similar characteristics, which has just, by 
some accident, lost all its own currency, and that 
the annexing country creates no additional currency, 
but allows the new province to supply itself as best 
it can. We may look on this as providing, after 
some initial disturbance, 10 per cent. of additional 
demand. The people in the new province, wanting 
a medium of exchange, would have to give people 
in the rest of the country commodities and services 
to induce them to part with some of their holdings 
of currency ; these sales would send down the prices 
of commodities and services, and correspondingly 
zlevate the value of the currency. There seems reason 
to believe that when things had settled down the 
rise in the value of the currency would correspond 
exactly with the increase of demand. If prices fall 
from eleven to ten, and £10 consequently buys as 
much as £11 did before, people will find it convenient 
to hold only £10 of currency when they held fix 
before. So to induce the old part of the country 
to part with one-eleventh of its stock of currency, a 
reduction of prices by one-eleventh will be necessary 
and sufficient. This supports the doctrine that in the 
absence of anticipation of future change the elasticity 
of demand for money is “ equal to unity.”