ABSTRACT
In order to do so it is necessary to anticipate the conclusions of the discussion on the relationship between 'targets' and 'control weapons' in Chapter V. We shall argue there that the appropriate controls to use to stimulate investment would be a depreciation of the foreign-exchange rate (to stimulate foreign investment by shifting demands from foreign on to domestic products) and a reduction of the interest rate (to stimulate domestic investment in new capital equipment). To prevent these increased investment demands from inflating domestically produced money incomes above their planned growth path, current consumption expenditures must be reduced. In Chapter V we shall argue that the appropriate 'control weapons' for this purpose would be fiscal, taking the form either of a reduction in the government's own current expenditures on goods and services or of a rise in tax rates to reduce demands for goods and services by personal consumers. In either case, as investment was raised to its target level, the public sector borrowing requirement would be reduced as government tax revenues rose and/or government current expenditures fell. At any given level of the total of domestically produced money incomes, a rise in investment would be accompanied by a fall in the public sector borrowing requirement.
