The Propensity to Consume: I. The Objective Factors

Abstract

We are now in a position to return to our main theme, from which we broke off at the end of Book I in order to deal with certain general problems of method and definition. The ultimate object of our analysis is to discover what determines the volume of employment. So far we have established the preliminary conclusion that the volume of employment is determined by the point of intersection of the aggregate supply function with the aggregate demand function. The aggregate supply function, however, which depends in the main on the physical conditions of supply, involves few considerations which are not already familiar. The form may be unfamiliar but the underlying factors are not new. We shall return to the aggregate supply function in chapter 20, where we discuss its inverse under the name of the employment function. But, in the main, it is the part played by the aggregate demand function which has been overlooked; and it is to the aggregate demand function that we shall devote Books III and IV.