110 THE GENERAL THEORY OF EMPLOYMENT BK. III

motives to saving and to consumption respectively.In so far as the distribution of wealth is determinedby the more or less permanent social structure of thecommunity, this also can be reckoned a factor, subjectonly to slow change and over a long period, which wecan take as given in our present context.

II

Since, therefore, the main background of subjectiveand social incentives changes slowly, whilst the short-period influence of changes in the rate of interest andthe other objective factors is often of secondary import-ance, we are left with the conclusion that short-periodchanges in consumption largely depend on changes inthe rate at which income (measured in wage-units) isbeing earned and not on changes in the propensity toconsume out of a given income.

We must, however, guard against a misunderstand-ing. The above means that the influence of moderatechanges in the rate of interest on the propensity to consumeis usually small. It does not mean that changes in therate of interest have only a small influence on the amountsactually saved and consumed. Quite the contrary. Theinfluence of changes in the rate of interest on the amountactually saved is of paramount importance, but is in theopposite direction to that usually supposed. For evenif the attraction of the larger future income to be earnedfrom a higher rate of interest has the effect of diminish-ing the propensity to consume, nevertheless we can becertain that a rise in the rate of interest will have theeffect of reducing the amount actually saved. Foraggregate saving is governed by aggregate investment;a rise in the rate of interest (unless it is offset by acorresponding change in the demand-schedule for in-vestment) will diminish investment; hence a rise inthe rate of interest must have the effect of reducingincomes to a level at which saving is decreased in the