ABSTRACT
In the last chapter we attempted to show how through its fiscal policy the government might set out to stabilize the general level of the prices of consumption goods and how, given any set of expectations about other relevant prices, through its monetary policy it might set out to influence the current selling prices of instruments of production. A reduction of interest rates, we argued, would in general tend to raise the selling prices of instruments of production relatively to those of consumption goods. But we have not yet tackled the problem to what extent citizens can accurately forecast the future course of prices. As we shall argue in the next chapter accurate forecasting of future prices is a necessary condition for the maintenance of equilibrium through time; and we shall have much to say on this matter in subsequent chapters.
