198 THE GENERAL THEORY OF EMPLOYMENT BK. IV

money, but may also give rise to changed expecta-tions concerning the future policy of the Central Bankor of the Government. Changes in the liquidityfunction itself, due to a change in the news whichcauses revision of expectations, will often be discon-tinuous, and will, therefore, give rise to a correspondingdiscontinuity of change in the rate of interest. Only,indeed, in so far as the change in the news is differentlyinterpreted by different individuals or affects individualinterests differently will there be room for any increasedactivity of dealing in the bond market. If the changein the news affects the judgment and the requirementsof everyone in precisely the same way, the rate ofinterest (as indicated by the prices of bonds and debts)will be adjusted forthwith to the new situation withoutany market transactions being necessary.

Thus, in the simplest case, where everyone is similarand similarly placed, a change in circumstances orexpectations will not be capable of causing any dis-placement of money whatever;—it will simply changethe rate of interest in whatever degree is necessary tooffset the desire of each individual, felt at the previousrate, to change his holding of cash in response to thenew circumstances or expectations; and, since everyonewill change his ideas as to the rate which would inducehim to alter his holdings of cash in the same degree,no transactions will result. To each set of circum-stances and expectations there will correspond anappropriate rate of interest, and there will never beany question of anyone changing his usual holdings ofcash.

In general, however, a change in circumstances orexpectations will cause some realignment in individualholdings of money;—since, in fact, a change willinfluence the ideas of different individuals differentlyby reason partly of differences in environment andthe reason for which money is held and partly ofdifferences in knowledge and interpretation of the