148

A TREATISE ON MONEY

BK. Ill

on which a change in the fundamental price-levelscould not occur without some change in the monetaryfactors. The theoretical possibility mentioned above-—and given, avowedly, as an extreme case for thesake of emphasising the essence of the argument—only holds good if entrepreneurs are solely influencedby their costs of production in deciding what amountof Business-deposits to maintain.

If, for example, entrepreneurs were to treat theirwindfall profits or losses exactly in the same way asthough they were regular personal income, when theyare deciding what influence the receipt of profits or theincurring of losses ought to have on the volume oftheir bank-deposits, a rise in the price-level due toan increase in the second term of the FundamentalEquation would require as great an increase in thequantity of money (or equivalent change in othermonetary factors)*as would a rise due to an increasein the first term. In fact this is not likely to be thecase. In fact, the receipt and disbursal of profits willbe likely—if it involves any material change in thebalances held—to involve a less holding of balancesthan would an equal increase in the receipt and dis-bursal of incomes—at any rate, over the short period.

Moreover, even though the ultimate recipients ofprofits, e.g. the individual shareholders, may treattheir receipt like income in spite of their not belongingto true income-deposits, yet now that the great bulkof business and industry is organised in the formof joint-stock companies (and the same thing wasprobably true to a large extent even in the days ofpartnerships), windfall profits are not disbursed toindividual accounts, as most incomes are, at weekly,monthly, or quarterly periods, but at much longerintervals and with a much greater time-lag after theyhave been gained. Not only will an interval of atleast half a year usually elapse, but a large part ofexceptional profits will often or generally be placed to