THE conclusions reached in this paper, insofar as they depend upon the limited postwar income and expenditures data available, should be considered as tentative, and subject to modification as new data come into use. Nevertheless, for reasons given below, it is felt that the correct long-run relationship between prewar and postwar income and expenditures is described, even though that relationship may not be exactly measured. Analysis of this relationship throws considerable light on such related questions as the cyclical variability of the consumption function, its stability in the long run, and the direction, if any, of the savings trend. In view of the importance of these questions, and the almost total disagreement which now exists on them, this paper is perhaps amply justified, even though in a sense premature.