Full text: Effective Demand in the Short Run and in the Long Run

greater part of her income from it. On the way to this ultimate 
aim the country will probably run into depressions. 
Naturally an import surplus will represent just the opposite of 
the above case. It will provide contraction in the short run 
which,if it is.-'to be stopped, will have to be contered by an 
export surplus which will increase effective demand. / 
4. Another parallel case is consumers credit and mortgages. In the 
aftermath of its expansion of consumption there remains the burden 
of service of the debt which reduces disposable income. 
Another case concerns a hausse in asset prices, for example, 
land which is created by additional spending of the developing 
agents and speculators. The speculative gains may be, even if only 
in part, spent on consumption, but later on the house owners will 
have to pay increased rents which diminishes their spending power. 
While all the above methods of increasing effective 
demand lead to a backlash this is not true for the method of 
changing the propensity to consume by changing the distribution of 
income in favour of low savers. If this is at the expense of 
profits the strategy may not be successful in so far as it could 
affect investment.But there are other groups of high savers which 
might be targeted,such as managers and professional people, and 
above all, the rentiers.A cheap money policy is primarily 
indicated if one wants to exert a lasting influence on effective 
demand. 
The negative aftereffects implied by budget deficits, export 
surplus or consumers credit will take quite a time until they work 
up to the point at which they call urgently for counteraction. It 
is therefore not implied here that such ways of creating effective 
demand can or should not be used . After a time, however, their
	        

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