CHAPTER 17

CHANGES DUE TO MONETARY FACTORS

It does not make muck difference to the subsequentcourse of the argument whether the balance betweenthe demand and supply of money for the IndustrialCirculation is changed as a result of a change in thetotal supply of money or of a change in the require-ments of the Financial Circulation, or of a changein the requirements of the Industrial Circulationrelatively to the value of output, or of a change in thevolume of Incomes. For example, if the requirementsof the Industrial Circulation are falling relatively tothe value of output, this means that entrepreneurs aregetting back against current sales more money thanthey require to maintain output at the existing bill ofcosts, so that the Banking System finds itself with re-dundant lending power at the old equilibrium, just asit would if the total supply of money had been aug-mented. It will be sufficient, therefore, to considerthe case of a change in the total supply of money.

(i.) The Industrial Consequences op aChanged Supply op Money

By what route will the injection of an increasedquantity of money into the monetary system, or awithdrawal of money from it, bring about a newequilibrium at a changed price-level ?

Since the injection of an increased quantity ofcash (using this word to include Central Bank reserves)

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