ABSTRACT
The object of this essay is to clear up some questions arising out of the Keynesian theory of the Multiplier. We shall first deal with the equation between the expenditure on investment I and the value of savings S which has been so much discussed since The General Theory appeared. However, before embarking upon further argument we want to examine in detail one point often touched upon in this discussion: whether or not I = S is a tautology. We define (as in the first essay, p. 14) the gross national income as the value added by all enterprises of an economy. Thus it is equal to total sales of all enterprises except those producing raw materials; i.e. to sales of goods to ultimate consumers + sales of newly produced fixed capital equipment + any increase in stocks and working capital. Sales of fixed capital equipment + increase in working capital and stocks may be called gross investment. Thus we have by definition:
National income = Sales of investment goods 1 + Sales of consumption goods
