298 THE GENERAL THEORY OF EMPLOYMENT bk. v

assume that they all vanish. Too large a proportionof recent “mathematical” economics are mere concoc-tions, as imprecise as the initial assumptions they reston, which allow the author to lose sight of the com-plexities and interdependencies of the real world in amaze of pretentious and unhelpful symbols.

IV

(i) The primary effect of a change in the quantityof money on the quantity of effective demand is throughits influence on the rate of interest. If this were theonly reaction, the quantitative effect could be derivedfrom the three elements— (a) the schedule of liquidity-preference which tells us by how much the rate ofinterest will have to fall in order that the new moneymay be absorbed by willing holders, ( b ) the schedule ofmarginal efficiencies which tells us by how much agiven fall in the rate of interest will increase investment,and (c) the investment multiplier which tells us by howmuch a given increase in investment will increaseeffective demand as a whole.

But this analysis, though it is valuable in introducingorder and method into our enquiry, presents a deceptivesimplicity, if we forget that the three elements ( a ), ( b )and (c) are themselves partly dependent on the com-plicating factors (2), (3), (4) and (5) which we have notyet considered. For the schedule of liquidity-prefer-ence itself depends on how much of the new money isabsorbed into the income and industrial circulations,which depends in turn on how much effective demandincreases and how the increase is divided between therise of prices, the rise of wages, and the volume of outputand employment. Furthermore, the schedule of marginalefficiencies will partly depend on the effect which thecircumstances attendant on the increase in the quantityof money have on expectations of the future monetaryprospects. And finally the multiplier will be in-