ABSTRACT
This chapter investigates the conditions under which the rate of growth of ceiling income, as generated by the demand-determined division of income between investment and consumption, is sufficiently large that self-sustained growth can take place. Existing econometric income models can be divided into two broad classes: short-run forecasting and long-run growth. Both the short-run and the long-run models are one-sided, in that they are concerned with either aggregate demand or aggregate supply, and incomplete, in that they do not include, in any deep sense, monetary and financial phenomena. A simple income model that allows for both the behavior of aggregate demand and supply can be built out of well-known ingredients. Standing by itself, the Hansen-Samuelson model states that income is determined by aggregate demand. The productive efficiency of investment put into place relates the change in aggregate supply to the change in capital stock. As such it is an incremental output/capital coefficient.
