THE THEORY OF INTEREST

be reduced to a simple problem of geometry, just asthe problem of price may be shown by supply and de-mand curves.

To depict adequately the elements of the interest prob-lejn, however, a new kind of chart is required. Our firsttask is to see the relation of this new kind of chart tothose hitherto used in this book. First, then, let us recurto Charts 1, 2, and 3, in Chapter I, which picture a per-son’s income stream over a period of years. This sort of

CHART 23

Annual Income Represented by Lines Instead of Bars.

chart consists of a row of vertical bars representing thereal income, as measured by the cost of living in succes-sive periods—days, months, or years. To prevent confu-sion, let us, for our present graphic purpose, shrink thesevertical bars into mere vertical lines, without breadth.Then, each year’s income may be pictured as if it were allconcentrated at a point of time, say in the middle of themonth or year concerned. Since the rate of interest isusually expressed in per annum terms, it will simplify thediscussion if these lines are drawn, as in Chart 23, dis-regarding all time units other than years. To make our

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