§10. Does Interest Stimulate Saving?

Just as the map helps visualize the theoretical possibility, yet practical improbability, of negative interest, so also it helps us to see clearly the answer to the much debated question whether saving is stimulated by raising the rate of interest.

If the reader will draw on the map any desired family of Willingness lines, place the individual at any desired income situation (or draw an Opportunity line to indicate all possible positions), and then incline a ruler at 45° and rotate it about that point (or roll it around that line) he will note that the points of tangency of the ruler with the several Willingness lines will themselves constitute a curve. The savings (or lendings) are evidently represented by the horizontal displacement of Q to the left of P. Opportunity and Willingness lines may easily be so constructed that, as the ruler turns clockwise interest rises and the amount saved and lent out of this year's income will first increase and then decrease.