CH. 18 CHANGES DUE TO INVESTMENT EACTOES 281

working capital. Moreover, whenever we have to dealwith a boom or a slump in the total volume of employ-ment and current output, it is a question of a changein the rate of investment in working capital ratherthan in fixed capital; so that it is by increased invest-ment in working capital that every case of recoveryfrom a previous slump is characterised.

Credit Cycles can be analysed into three types,—though those which actually occur are generally com-plex in type and partake of the character of all three.Let us take the case where investment is increasingrelatively to saving:

(i.) The increased investment may take place,without any change in the total volume ofoutput, by the substitution of the productionof capital-goods in place of consumption-goods ; in this case the increase of invest-ment will not materialise until after the elapseof a production period.

(ii.) The increased investment may take the formof an increase of working capital corre-sponding to an increased total output dueto an additional production of capital-goodsbeing superimposed on the existing output;in this case the increase of investment willbegin from the outset, being first of all in theshape of working capital and, after the elapseof a production period, in the shape of fixedcapital.

(iii.) The increased investment may take the formof an increase of working capital corre-sponding to an increased total output due toan additional production of consumption-goods being superimposed on the existingoutput; in this case the increase of invest-ment will only continue for the duration of aproduction period.