ABSTRACT
This chapter analyses the mechanism of the expansion and contraction processes. It begins the analysis of the process of expansion at its starting-point—viz., at the bottom of the depression. An expansion of the monetary circulation, in the sense that the money value of the volume of production and total demand for goods in terms of money per unit of time increases, is a regular feature and, we may add, an indispensable condition for a rapid expansion of production after a slump. The process of contraction, like the process of expansion, is cumulative and self-reinforcing. Once started, no matter how, there is a tendency for it to go on, even if the force by which it was provoked has in the meantime ceased to operate. The contraction may start from a state of full employment or partial employment; and the mechanism is, in principle, the same in both cases.
