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A TREATISE ON MONEY

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output of the community which takes the form of thegoods so consumed; in other words, on whether thedivision of income between savings and expenditureon consumption is or is not the same as the division ofthe cost of production of output between the cost of thegoods which are added to capital and the cost of thegoods which are consumed. If the former proportionis greater than the latter, then the producers of thegoods which are consumed make a profit; and if theformer proportion is less than the latter, then theproducers of the goods which are consumed make a loss.

Thus the price-level of the goods which are con-sumed ( i.e. the inverse of the Purchasing Power ofMoney) exceeds or falls short of their cost of produc-tion, according as the volume of savings falls short ofor exceeds the cost of production of new investment(i.e. of the goods which are added to the stock ofcapital). Hence, if the volume of savings exceeds thecost of investment, the producers of the goods whichare being consumed make a loss ; and if the cost ofinvestment exceeds the volume of savings, they makea profit.

What happens to the price-level of new invest-ments, i.e. of the goods which are added to the stockof capital ? For a detailed answer to this question Imust ask the reader to be patient and to wait forwhat he will find in later chapters. It is importantfor him to understand that the account of this matterwhich I have given in Chapter 10 is not intended tobe more than a preliminary treatment of this subject.Broadly speaking, it depends on the anticipated price-level of the utilities which these investments will yieldup at some, future date and on the rate of interest atwhich these future utilities are discounted for thepurpose of fixing their present capital value. Thus,whether producers of investment-goods make a profitor loss depends on whether the expectations of themarket about future prices and the prevailing rate of