98 THE GENERAL THEORY OF EMPLOYMENT BK. III

On the other hand, a decline in income due to adecline in the level of employment, if it goes far, mayeven cause consumption to exceed income not only bysome individuals and institutions using up the financialreserves which they have accumulated in better times,but also by the Government, which will be liable, will-ingly or unwillingly, to run into a budgetary deficit orwill provide unemployment relief, for example, out ofborrowed money. Thus, when employment falls toa low level, aggregate consumption will decline by asmaller amount than that by which real income hasdeclined, by reason both of the habitual behaviour ofindividuals and also of the probable policy of govern-ments ; which is the explanation why a new position ofequilibrium can usually be reached within a modestrange of fluctuation. Otherwise a fall in employmentand income, once started, might proceed to extremelengths.

This simple principle leads, it will be seen, to thesame conclusion as before, namely, that employmentcan only increase pari passu with an increase in invest-ment; unless, indeed, there is a change in the pro-pensity to consume. For since consumers will spendless than the increase in aggregate supply price whenemployment is increased, the increased employment willprove unprofitable unless there is an increase in invest-ment to fill the gap.

IV

We must not underestimate the importance of thefact already mentioned above that, whereas employ-ment is a function of the expected consumption andthe expected investment, consumption is, cet. par., afunction of net income, i.e. of net investment (net incomebeing equal to consumption plus net investment). Inother words, the larger the financial provision which itis thought necessary to make before reckoning net in-