ABSTRACT
Policy to deal with inflation is a subject on which a great deal has been written and argued by eminent authorities without adding substantially to knowledge. To get somewhere, it is necessary to have a theory to work with, even if it is no stronger than the feeling that consumption and saving can be changed by altering income. The post-war period has seen a variety of methods used to influence investment, from direct controls, such as licensing and planning permission, to various monetary and fiscal policies. The adjustments in prices and output that businesses make in response to government policy changes are at least as difficult to sort out as any that have so far been considered. An increase in the price may lead to some substitution of other goods that are unchanged in price, that is now relatively cheaper. Likewise, a decrease in the price may lead to the substitution for other goods.
