chapter  II
12 Pages

Environment, Expectations, Decisions, Controls and the State of the Economy

When we consider the movement of the economy through time, we are considering the state of the economy at successive points of time. By the state of the economy at any point of time we mean simply a catalogue of all the economic variables at that point of time: the size of the capital stock of various machines, etc; the levels of the outputs of the various sectors of the economy; the levels of the various kinds of income (wages, profits, rents, etc.) received by various classes of citizen; the prices of the various inputs and outputs; the level of different rates of interest; and so on. Yesterday, each of these variables was at one level; today, they are at another level. We call all these variables the 'state of the economy' and watch the way in which it changes with time.