If the market interest rate is lower than the rate of expected profit, bank lending will increase, the quantity of money will increase, and prices will rise. On the other hand, if the market interest rate is higher than the rate of expected profit, bank lending will decrease, the quantity of money will decrease, and prices will fall.
Thornton distinguishes between nominal and real interest rates, taking into account changes in inflation  10  expectations.14 His account of changes in inflation expectations was later taken up by Irving Fisher, while his two-interest-rate analysis was later adopted by Knut Wicksell; both form the theoretical basis of modern macroeconomics.