OH. 18 CHANGES DUE TO INVESTMENT FACTORS 277

makes it appropriate to designate investment disturb-ances as Credit Cycles.

(i.) The Definition of the Credit Cycle

Our Fundamental Equation bas demonstrated that,if Costs of Production remain constant, the PurchasingPower of Money suffers a see-saw movement up anddown according as the volume of savings exceeds thecost of investment or the cost of investment exceedsthe volume of savings. On the other hand, if thevolume of savings is equal to the cost of investment,then the Purchasing Power of Money fluctuates in-versely with the Costs of Production. Moreover, theeffect on the Purchasing Power of Money of a changein the Costs of Production and the effect on it of adisequilibrium between the volume of saving and thecost of investment are additive and superposable.

We have called increases and decreases in the Costsof Production Income Inflation and Deflation respect-ively, and excesses and defects in the cost of invest-ment over the volume of saving Commodity Inflationand Deflation respectively. We now define the CreditCycle to mean the alternations of excess and defectin the cost of investment over the volume of saving andthe accompanying see-saw in the Purchasing Power ofMoney due to these alternations. In any given cir-cumstances, however, Costs of Production are unlikelyto remain stable throughout the course of a CreditCycle. Indeed, as we shall see subsequently, Com-modity Inflation and Deflation are likely in themselvesto set up influences tending towards Income Inflationand Deflation. Moreover where the initial stimulus tochange comes from monetary changes, we have alreadyseen that these in their turn must set up credit dis-equilibria. Thus the actual course of events observ-able at any time will be a complex phenomenonresulting from the combined effects of changes in the