32
INTERNATIONAL TRADE
German prices and in money incomes will go on until the eventual
limit is approached when there is no longer any gain at all to
Germany from the exchange. In the United States, on the other
hand, the extent of the readjustment will be affected by the state
of her demand for linen. If that demand is elastic — if her people
buy more linen quickly as the price begins to fall — the movement
of specie into the United States will be less great than it would be
if the demand were inelastic. The rise in prices and in money
incomes will be less, the alteration in the barter terms of trade less
markedly to the American advantage.
Something must be added to this. It is not merely the character
of the American demand for German goods that has to be con-
sidered. Regard must be had also to the demand schedules of the
Americans for their own product, of the Germans for theirs.
When German linen falls in price, the Americans, while tempted
to buy more linen, must consider the fact that in order to do so
they must dispense with some wheat which they have been con-
suming. And the Germans on their part, when American wheat
rises in price, have to consider that their payment of an additional
price for the wheat necessarily involves a diminution in the amount
they can spend on their own linen.
In other words, the supposition of the preceding paragraphs
tacitly included the assumption that the Germans did experience
this sort of double change in their demand schedules. When the
German demand for wheat increases, as was assumed above, that
very change necessarily implies that the German demand for
linen is less insistent than before. They care more for wheat and
less for linen.
Analogous, tho not quite the same, is the position of the Amer-
icans. They are offered more of linen than before for a given
quantity of wheat, and have to decide whether they will take more
linen and consume less of their own wheat. The character or
intensity of their demand for the two articles is not supposed to
have altered. It is only that, with demand schedules unchanged,
they are called on to use less of wheat and to buy more of linen.
While the outcome depends in both countries on the double aspect
