Prosperity and Depression.pdf

Chap. 13 The Multiplier, Rigidities and Public Spending 457income. 1 All magnitudes are defined in monetary units (dollars) andit is immaterial whether and to what extent an. increase in money incomewill be translated into increased output and employment or will bereRected only in a rise of prices.Suppose now we have not one additional expenditure, but. a wholeseries of such expenditures of, say, 100 dollars each in successive periodsand suppose c is %, that is to say 80 per cent of the increment in incomeduring any period is spent on consumption in the followingperiod. In successive. periods, we obtain then the following series ofexpenditures representing increases in income:Num· Inibe,tialof expendiperiodturesTABLE IIncome receipts through successive expenditures of four-fifthsof receipts in preceding period 22345678910100,lOa 80,lOa 80 64,100 80 64 51.2lOa 80 64 51.2 ~0.96lOa 80 64 ~1.2 40.96 ~32.77100 80 64 51.2 40.96 32.71~26.21lOa 80 64 51.2 40.96 32.77 26.21 '-20.97100 80 64 51.2 40.96 32.77 26.21 20·97~16'7~lOa 80 64 51.2 40.96 32.77 26.21 20·97 16·79 13·421 In the field of government finance the concept "net income creating expenditure"has been coined as a substitute for "investment," because it has beenrealised that the classification of all government expenditure in excess of taxreceipts as investment is in many cases somewhat artificial. There are other expressionsfor the same magnitude, such as "net contribution to buying power orto disposable cash income", "stimulating expenditure and depressive withdrawals".Monthly series of income creating expenditures of the Federal Government havebeen developed by L. Currie, Arthur Gayer and Martin Krost. For a comprehen.sive discussion and references to the literature and sources see H.H. Villard,Deficit Spending ana National Income (1941), Pait III, and a forthcomingvolume published by the "Conference on Research in the Field of Fiscal Policy"of the National Bureau of Economic Resea1'ch.For an analysis of analogous problems. in another field, viz., in the field ofconsumer credit, see the forthcoming study, Haberler, Consumer InstalmentCreait ana Economic Fluctuations (National Bureau of Economic Research,Monograph NO.9 of the Financial Research Program, New York, 194 1 ).2 The figures are taken from the more elaborate table in Professor Machlup'sarticle, loco cit., page 18.