CH. 20 PURE THEORY OF THE CREDIT CYCLE 315

(7) The argument assumes that factors of produc-tion receive larger money incomes, and consume corre-spondingly more, when they are employed than whenthey are unemployed, so that an increase in the volumeof employment by involving larger incomes for theunits previously unemployed means, during a period oftime equal to the length of process, smaller real in-comes for the units already employed. In so far asthis is not the case ( e.g. as the result of unemployedbenefit) the increment of working capital requiredmay be partly made good from the source out ofwhich the incomes of the unemployed were previouslypaid. 1 This does not affect the character of the argu-ment, but means that the amount of the necessaryprice rise is correspondingly diminished. If, for ex-ample, unemployed pay is half of employed pay, the

00

above equations will still hold good with ^ substituted

throughout for x. And if the Society under considera-tion is one in which the factors of production receiveexactly the same rate of wages whether they areemployed or unemployed (“ Work or Maintenance ”),then, obviously, there will be no rise of price at all.On the other hand, prices will in these cases slumpbelow the initial level at the end of the production-period, unless the funds, formerly used to pay the doleand subsequently used to replenish working capital,are then employed to augment consumption or in-vestment in some other direction.

(8) There is one paradoxical fact of outstandingimportance—already mentioned, but worth repeating.The addition to the accumulated wealth of the com-munity over any given period of time depends on thedecisions which are taken, mainly by entrepreneurs

1 If payments to the unemployed are charged against industry, then theeffect of increased employment is to decrease efficiency-wages, assumingthat wages per factor employed are unchanged. Alternatively we mayregard the expenditure of the unemployed as negative saving.