Page:Indian Journal of Economics Volume 2.djvu/101

 INil'EltE$. AND DI$COUNII  89 necessita more (monetary) capital for all new enter. prises and which may thus termly destroy the tendency to a decreased rate o! discount. Similarly a decrease in the supply o! told will mean eetr/s 10zibu, a decrease in cash holdings, a rise in the rate o! dis- count and eventually a fall of prices which will enable monetary capital to tend to a fall in the in the flow of on the rate of do rate gold exert discount, more work and will thus o! disco. But changes only temporary impressions and cause it to flucrusts by the rate round a point which is determined interest. In the (of London) for October ' 1906 I described an hydraulic model illustrating vrious monetary phenomena.  On that model the connection between the rate of interest and fresh supplies of gold was shown by a method which did not show sufficiently the influence of the rate of interest. I propose now to describe a model which shows this connection more correctly (see figure ov. erleaf). Let A be a cylinder closed at the bottom end and open at .the top, ex. cept for a piston-head G, closely fitting rate the cyhnder, but able to move up and down. Into DE is a cylinder the cylin.der A runs a pipe CB. concentric with the pipe CB, but so arranged that it can revolve freely round its axis. the pipe so that when the ,cylinder DE At another point in such a way opposite sense.  Inside CB, and attached to DE, is a turbine, water passes to revolve on DE is attached the weight as to tend to revolve DE in To from C to B it causes in the direction E F. w the the piston-head G is attached I This model is slM deooribed in the writer's Universi Piere. S This string, ss slM the string T, is wound round the oylinder D E several times be/a being s#sohed to it. Neither strin, t&om, is fixed in 4en$ 1!