ABSTRACT
In order to appreciate the problem it is necessary to consider the way in which the automatic feedback rules will have been devised. The economic system comprises a network of complicated dynamic interrelationships between the various elements - between prices, outputs, imports, exports, incomes, interest rates, tax rates, foreign-exchange rates and so on. Some of these variables - in our case the rates of tax and of foreign exchange - may be called 'control' variables. Of the remainder some are called 'exogenous' variables, being determined solely by outside forces (for example, the world demand for our exports). Others are called 'endogenous' variables since they are affected also by what has happened inside the economic system. For example, the demands by consumers for consumption goods will be affected by what has happened in the recent past to the consumers' incomes, to the prices of such goods, and so on. And in turn these incomes and prices will have been affected by what producers have produced and sold to meet the past demands of 'inside' consumers for consumption goods as well as the 'outside' purchasers of our exports.
