of outputs. Both p(z) and G(z) become 2x2 matrices in

The greatest shortcoming of the policy presented in Chapter XIV is that when exogenous disturbances on domestic demand are corrected by the manipulation of tax rates, there is considerable subsequent disturbance of the balance of payments on current account. Also, an exogenous disturbance on the balance of payments results in an appreciable disturbance of the Money GDP. From equation (57) we see that the mathematical remedy for these 'interactions' is the reduction in magnitude of elements (1,2) and (2, 1) of the sensitivity function. From equation (69) we deduce that IQ12(z)/det (z)1 and IQ21(z)/det (z)1 should be reduced.