CH. 20 PURE THEORY OF THE CREDIT CYCLE 307

Assumption Delta. It is assumed that there is noIncome Inflation, so that the rates of efficiency-wages of the factors of production are unchangedthroughout: i.e. that the money-costs of produc-tion are constant.

Assumption Epsilon. It is assumed that the durationof the productive process is the same for all com-modities, and that the process is a steady process.

Assumption Zeta. It is assumed that wages are paidat the end of regular intervals, which we will call“ weeks ”, in respect of work done during eachweek; that the wages thus paid are only availablefor expenditure by the recipients in the followingweek; and that expenditure during any week is ata steady rate ; that is to say, the expenditure inany week is governed by the income of the previousweek, the income earned in respect of work doneduring the current week not being received intime to affect expenditure during that week. Itis assumed further that consumers carry forwardin their income-deposits over the week-end anamount equal to their incomes just received inrespect of the current week plus a constant pro-portion of their incomes in the previous week.

When money - incomes are unchanged or arechanging at a constant rate, the above means thatthe income-deposits carried forward at the end ofeach week are a constant proportion of the week’sincome and that the velocity of circulation of theincome deposits is constant. But when money-incomes are changing, the position is not so simple.For if k-L stands, as before, for the inverse of thevelocity of circulation of the income-deposits, w xand w 2 for the income of two successive weeks,and m . + iv 2 for the carry-forward at the end of

the second week (in accordance with the aboveassumption), then the expenditure in the third