Money

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Monograph

Identifikator:: 1819853969

URN:: urn:nbn:de:zbw-retromon-207464

Document type:: Monograph

Author:: Cannan, Edwin http://d-nb.info/gnd/118666916

Title:: Money

Edition:: 6. ed.

Place of publication:: [London]

Publisher:: King

Year of publication:: 1929

Scope:: XII, 120 Seiten

Digitisation:: 2022

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part II. Further elucidations

Collection:: Economics Books

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.”

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