In this section, the final one of the chapter, the author summarizes his analysis of the effects of interest rate changes on expenditures. He notes that his approach is different than that of other writers but that he is "preparing the ground for an attempt to apply to the general dynamic problem the same sort of reasoning as we used in statics." The key insight here appears to be his grouping of "the relevant forces in a particular way."
He notes that the traditional way of deriving the effects of interest rate changes on expenditures would be "(i) to inquire how the amount spent out of a given income would be affected; and (ii) ... to inquire how the level of income would be affected" by the interest rate changes.
He then notes that "the effect on the level of income is not at all a simple effect." He clarifies matters by decomposing this effect into two components:
(ii a) the effect on the incomes of entrepreneurs which would accrue even if they kept their production plans entirely unchanged; and (ii b) the effect on their incomes and on those of other people as well which results from any changes they may make in their production plans.
He points out that his analysis involves grouping the effects (i) and (ii a) together, which allows him to avoid dealing with the concept of income, which as he notes, "We ourselves have learnt to mistrust." With this simplification, he is able to conclude that, when prices and production plans are given, "a change in the rate of interest will affect the volume of current expenditure in the opposite direction," although he states that it is "quite another matter to say how large this effect may be."
