CH. 20

PURE THEORY OF THE CREDIT CYCLE 317

will in such circumstances be, for them, cheap anduseful; for it will, without diminishing their aggregateconsumption, entitle them to wealth which wouldotherwise accrue to the entrepreneurs.

(iii.) The Generalised Case

We must now endeavour to remove some of thelimitations by assuming which we have been simpli-fying our argument.

(1) Assumption Alpha.

If current savings are greater than is here assumed,the rise of prices is correspondingly less—since theincrement of buying for consumption will be less than

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the amount of £ r P er wee k which is assumed above ;

and correspondingly, if current savings are less. Butthis does not alter the character of the argument; it

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merely means that we must substitute for g _ ^ in our

calculations, a term which is either less or greater thanthis.

Similarly, if net new investment, apart from theaddition to working capital, is diminished or increasedwithout ally corresponding change in savings, theeffects on prices, etc., as given above, will be eithermitigated or aggravated, without being changed incharacter. In so far, for example, as the growth ofworking capital can be offset by a diminution of theForeign Balance, the mitigating effects come underthis head.

In short, the phenomena of the Credit Cycle aremore or less violent than in the Standard Case, accord-ing as the actual disequilibrium between Savings andInvestment exceeds or falls short of AssumptionAlpha.

The main difference, however, in the development