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A TREATISE ON MONEY

BK. IV

week is w 2 + m(iv x — w 2 ) and the average level ofincome-deposits is m . w x + w 2 - \{w 2 + m{iv x -w 2 j},which is the balance at the middle of the week,

which is only constant if wages are stable or areincreasing at a steady (geometrical) rate.

Assumption Eta. It is assumed that, whatevermistakes may have been made in the past, allthose concerned accurately forecast the subsequentcourse of the Credit Cycle.

Let the length of the production period (assumeduniform in length and steady in intensity in accordancewith assumption Epsilon) be equal to 2r -1 of theseunits of time or “ weeks ”.

Then if a = the flow of earnings in terms of money

per unit of time, and

t = the proportion of earnings spent onconsumption, and also—in virtue ofAssumption Alpha—the proportionof output emerging in a form avail-able for consumption,

we have initially,

a . r = cost of production of working capital; 1and

t . a = the flow of consumption.

Let p be the price-level of goods available for con-sumption.

Now let us suppose that the proportion of thefactors of production out of work to those in work is x,and that a movement starts to increase employmentup to capacity and therefore working capital in theproportion x. We will assume, in accordance with

i.e. l{w 2 +m(iv 1 + w 2 )}, so that 7c x

— 2

w 2 + m(w x + w 2 )

w 2 + m(w x - w 2 ) ’

(2r - l)a

1 For

2r- 1 + 2r- ] ^ 2r- 1

2r -1