cn. 9

CERTAIN DEFINITIONS

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period is equal to the non-available output plus theincrement of hoards.

(iv.) Foreign Lending and the ForeignBalance

When we are dealing with an international, andnot with a closed, system, we must, first of all, adjustour definition of the national output. That part ofcurrent output which belongs to foreigners ( e.g . becausethey have a claim on the factors of production whichhave gone to produce it) we exclude from the nationaloutput; and similarly we must add to it the currentoutput produced abroad which belongs to our ownnationals. Further, where home-owned output ofgoods or services is exchanged for foreign-owned out-put of goods or services, we must—when we are dealingwith real output as distinct from its value—substitutethe foreign items thus received for the home items ex-changed for them in our aggregate of national output.

Next, we propose to distinguish by definition be-tween a country’s “ foreign lending ” and its “ foreignbalance,” in a manner partly corresponding to thedistinction made above between “ saving ” and “ in-vestment ”. The balance of trade on income account,resulting from the excess of the value of home-ownedoutput of goods and services (other than gold), whetherproduced at home or abroad, placed at the use anddisposal of foreigners, over the value of the correspond-ing foreign-owned output placed at our use and dis-posal, we shall call the country’s Foreign Balance,which may, of course, be positive or negative.

By Foreign Lending, on the other hand, we pro-pose to mean what might, perhaps, be called the un-favourable balance of transactions on capital account,i.e. the excess of the amount of our own money putat the disposal of foreigners through the net purchaseby our nationals of investments situated abroad, over