Prosperity and Depression.pdf

Nature and Causes of' the CyclePart IInot, however, help very much, since neither M nor V is statisticallyascertainable .(except by way ofcomplicated indirect estimateswhich are not very reliable). We shall do better to start withthose magnitudes which are statistically meas\1rable, viz. :(a) Legal tender money, notes, coins;(b) Bank: deposits subject to cheque;(c) Velocity of circulation of (b).These three items constitute) of course, only a fraction of thetotal in which we are interested. We cannot readily measure thevelocity of(a). Furthermore, credit instruments (bills) frequentlyfunction like money, and a number of transactions are settled bydirect offsetting without the use of money. (It is immaterialwhether one construes such cases as implying changes in thevelocity ofcirculation ofmoney proper orin the quantity ofmoney.In any case-and this is the important thing-an increase ordecrease in the total demand for goods in terms of money can beeffected by such practices.)§ 5. WHY DOES THE PRODUCTION OF PRODUCERS' GOODS ANDDURABLE GOODS RISE FASTER THAN THE PRODUCTION OFPERISHABLE CONSUMERS'GOODS?Many writers have pointed out that, for technicalThe essenceof the" ar;-celerationreasons, changes.in the demand for, and productionof~ finished goods give rise to much more violentchanges in the demand for, and production of,principle ". producers' goods. ·This is one of the most importantapplications of the so-called principle of theacceleration and magnification of derived demand which we havestated and dis'russed, with all necessary qualifications, in anearlier part of this study (see Part I, pages 85 et seq.). It remainsto determine its place and function within the mechanismof expansion.The essence of the acceleration principle can, as we have seen,be summed up in the statement that, to enable the output to beexp~ded, it may be. necessary to make heavy immediate investmentswhich will continue to bear fruit for some time into the