In this section, Hicks notes that two potential "difficulties" in discussing the rate of interest have already been dealt with by the previous analysis. The first is that calculating the interest rate, not in isolation but "as part of a mutually interdependent system" that includes all the commodity prices, might seem to complicate the problem. On the contrary, Hicks notes that because the interest rate is a price, like other prices, determining it is part of "the general problem of price-determination in an economy where borrowing and lending are practiced," which makes the problem "a good deal easier to understand."
The second potential difficulty is that of determining "the" interest rate, when in reality there would seem to be many different interest rates in an actual economy. The simplified models of the previous chapter provided two different ways in which an economy could be analyzed as having only one rate of interest -- either the single-period "short rate" or, alternatively, the "long-rate" corresponding to a spot market in which all loans are assumed to last indefinitely.
Hicks therefore notes that the problem to be discussed in the present context "divides into two sub-problems, according as we assume short lending, or long lending, to be the only kind of lending practiced." The upcoming sections of the chapter will examine these two cases in turn.
