THE THEORY OF INTEREST

§11. Deciding Whether to Borrow or to Lend

Individual character and income together with the mar-ket rate of interest determine what the individual willdo in any given situation. Chart 32 pictures graphicallyone step in the process by which an individual adjustshis degree of impatience to the market rate of interest,by borrowing or lending.

CHART 32

Adjusting Impatience to Market Rate of Interest Through Borrowing.

To summarize and repeat, with the interest rate at10 per cent, Individual 1 may, or may not, be willingto take a $100 loan, depending upon whether or not,while his position is at P lt his impatience is or is notgreater than this 10 per cent. If, as portrayed by Chart 32,his impatience is greater—say, 30 per cent—and if hecan obtain the loan at 10 per cent, he will be glad to doso. Let Wi be the position to which he is willing to shift

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