310

A TREATISE ON MONEY

BK. rv

mC( 1 — Ml)

Thus the consumers lose a proportion of the

purchasing power of their money incomes, and thoseentrepreneurs whose goods have emerged in availableform during the time-interval in question, and so fetch

price pll + t ( 2 r -1) ) of p, have gained a profit

of the same amount.

The volume of earnings in the second week is

(27 -1) )’ an d the new price-level in the third

week will be, by the same reasoning as before,

p(l + f(2r -T) )' ^his process then continues until

2r -1 weeks have passed, at the end of which timethe volume of earnings will be a(l +x), and theprice-level during the (2r - l)th interval will be

/ x(2r -2 -m)\ ..... ,

p[ 1 + — H( y v _ , ^ — ), which—it 2 r -1 represents a sub-

a 1 +■

t(2r - 1)

stantial number of weeks—is practically equal to

' x\

1 +

+ jJ‘ That is to say, if r is large, 1 both absolutely

and relatively to m, the rise of prices is retarded verylittle by the consumers maintaining the ratio of theirincome-deposits to their money incomes. Such re-tardation of the rise of prices as occurs is due partlyto the earners being paid one week late, and partlyto their increasing the unspent income carried forwardfrom one week to another so as to keep their income-deposits in the appropriate relation to their money-incomes.

The increase in the volume of income-deposits willhave amounted by this time (i.e. carried over at the

2r - 2

end of the (2r-l)th week) to a.x (1 +

2r -1

m

Meanwhile the whole body of consumers, including

1 As to the probable magnitude of r, see Vol. ii., Chap. 28.