ABSTRACT
EARLIER WE considered some of the important measures called for by inflation, and called attention to the need for flexible measures to cope with both inflation and deflation. In this chapter and the next we shall concentrate on measures to minimize the danger of cyclical and chronic depressions. Certain “trend forces” are at work to change the propensities to consume, to save, and to invest, but we cannot rely upon those forces for solving the problem of periodic or chronic depression. For it takes time for those forces to make their impact felt, apart from the uncertainty in the direction of their change. Our analysis of effective demand indicates that conscious public-policy measures are required to promote the private inducement to invest, and to raise the consumption function in order to maintain full employment continuously. We shall begin with those measures designed to promote investment.
