chapter  2
45 Pages

Finance and Profits: The Changing Nature of American Business Cycles

Cash payment commitments on outstanding instruments are contractual commitments (1) to pay interest and repay the principal on debts and (2) to pay dividends-if earned-on equity shares. These cash payment commitments are money flows set up by the financial structure. A structure of expected money receipts underlies the various commitments to make payments on existing debts. Each economic unit-be it a business firm, household, financial institution, or government-· is a money-in-money-out device. The relation among the various sources and uses of cash for the various classes of economic units determines the potential for instability of the economy.