THE ECONOMIC JOURNAL [MARCH Equation, constituting the marriage of the acceleration principle and the multiplier theory. This probably gives too much importance to the acceleration principle, and the necessary modi fication is introduced subsequently. Let G stand for the geometric rate of growth of income or output in the system, the increment being expressed as a fraction of its existing level. G will vary directly with the time interval chosen per mo stand for the warranted rate of growth. The warranted rate of growth is taken to be that rate of growth which, if it occurs, will leave all parties satisfied that they have produced neither more nor less than the right amount. Or, to state the matter otherwise it will put them into a frame of mind which will cause them to give such orders as will maintain the same rate of growth. I use the unprofessional term warranted instead of equilibrium, or moving equilibrium, because, although every point on the path of output described by Go is an equilibrium point in the sense that producers if they remain on it, will be satisfied, and be induced to keep the same rate of growth in being, the equilibrium is, for reasons to be explained, a highly unstable one If ao is output in period 0 and a, output in period 1, G Ro. Since we suppose the period to be short, to or al may alternatively stand in the denominator wo and an are compounded of all individual outputs. I neglect questions of weighting. Even in a condition of growth which generally speaking is steady, it is not to be supposed that all the component individuals are expanding at the same rate Thus even in the most ideal circumstances conceivable. G. the actual rate of growth, would diverge from time to time from gao, the warranted rate of growth, for random or seasonal causes. et 8 stand for the fraction of income which individuals and corporate bodies choose to save, is total saving divided by o or ar. This may be expected to vary, with the size of income, the phase of the trade cycle, institutional changes, etc. Let C stand for the value of the capital goods required for production of a unit increment of output. The un value used to measure this magnitude is the value of the unit increment of output. Thus, if it is proposed in month 1 to raise the output of shoes, so that in month l and all subsequent months output is one pair higher than in month 0, and the machine required to do this-neglecting all other capital that may be required--has a value 48 times the value of a pair of shoes, C per month=48