28 THE GENERAL THEORY OF EMPLOYMENT BK. I

be found to depend on the relation between the scheduleof the marginal efficiency of capital and the complex ofrates of interest on loans of various maturities and risks.

Thus, given the propensity to consume and the rate ofnew investment, there will be only one level of employ-ment consistent with equilibrium; since any other levelwill lead to inequality between the aggregate supply priceof output as a whole and its aggregate demand price.This level cannot be greater than full employment, i.e.the real wage cannot be less than the marginal disutilityof labour. But there is no reason in general for expect-ing it to be equal to full employment. The effectivedemand associated with full employment is a specialcase, only realised when the propensity to consume andthe inducement to invest stand in a particular relation-ship to one another. This particular relationship,which corresponds to the assumptions of the classicaltheory, is in a sense an optimum relationship. Butit can only exist when, by accident or design, currentinvestment provides an amount of demand just equal tothe excess of the aggregate supply price of the outputresulting from full employment over what the com-munity will choose to spend on consumption when it isfully employed.

This theory can be summed up in the followingpropositions:

(1) In a given situation of technique, resources andcosts, income (both money-income and real income)depends on the volume of employment N.

(2) The relationship between the community’sincome and what it can be expected to spend on con-sumption, designated by D1? will depend on thepsychological characteristic of the community, whichwe shall call its propensity to consume. That is to say,consumption will depend on the level of aggregateincome and, therefore, on the level of employment N,except when there is some change in the propensity toconsume.