244

A TREATISE ON MONEY

BK. IV

Each of these two branches of Business utilises acertain part of the total stock of money. Broadlyspeaking, Industry requires the use of the Income-deposits and of a part of the Business-deposits, whichwe will call Business-deposits A ; whilst Finance re-quires the use of the Savings-deposits and of the re-mainder of the Business-deposits, which we will callBusiness-deposits B. Thus the sum of the two formeris the Industrial Circulation and the sum of the twolatter the Financial Circulation. Since we shall arguethat the absolute variability of the Business-depositsB is, as a rule, only a small proportion of the totalquantity of money, this being a consequence of theirvery high velocity, changes in the Cash-deposits ( i.e .Income-deposits plus Business-deposits) are generallya good index of changes in the Industrial Circulation;and, similarly, changes in the Savings-deposits ofchanges in the Financial Circulation—which fortu-nately brings us back to classes of deposits of themagnitude of which we have in practice moderatelygood statistical indications.

(ii.) Factors determining the Volume oe theIndustrial Circulation

Since MjVj = E, the amount of money M x requiredfor the Income-deposits depends partly on E, thevolume of income, and partly on Vj, the velocityof the Income-deposits; and since E = WjO, Edepends on W 1} the money-rate of efficiency-earnings,and 0, the volume of output. The causes whichdetermine the variability of V a we shall consider indetail in Vol. ii. Chapter 24.

As regards the Business-deposits A, it is evidentin the first place that the volume of a part of themtends to move much in the same way as that of theIncome-deposits. For the Income-deposits are con-stantly flowing into the Business-deposits through