ABSTRACT
From a purely practical point of view, a rising price level, provided that the movement is moderate, is decidedly more in accordance with the requirements of progress and prosperity than a falling price level. The rise encourages productive activity, since it increases the prospects of profit for producers and it penalises unproductive capital. Under rising prices there is ample scope for the expansion of production both regarding its extension and its intensity. It becomes profitable to fertilise hitherto unproductive areas ; to connect up backward regions with modern means of transport; to improve land and other means of production through capital expenditure; to modernise plants and apply new inventions; to experiment with new methods, whose commercial value is not yet proved ; to encourage every kind of improvement, innovation and invention. On the other hand, during a period of falling prices, the exploitation of relatively less profitable means of production has to be abandoned, progress towards expansion is reversed, the risk attached to the application of new methods is increased, invention and innovation requiring capital expenditure is discouraged.
