Journal Article Machlup on the Basing-Point System Get access J. M. Clark J. M. Clark Columbia University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 63, Issue 3, August 1949, Pages 315–321, https://doi.org/10.2307/1882257 Published: 01 August 1949

Introduction, 238. — I. Selling Policy, 239. — II. Integration, 244. — III. Buying Policy, 247. — IV. Conclusions, 255.

R EFERENCES to the velocity of circulation of money sometimes imply that movements of V are accurate guides to shifts in the aggregate-expenditure function. Among the varieties of economic analysis in which identity of velocity changes and aggregatedemand-schedule changes has been implicitly assumed are controversy concerning the validity of the lack-of-investment-opportunity theory of business downturns2 and speculation concerning the behavior of velocity in a Iooper-cent-reserve monetary system.3 As various economists have pointed out, however, changes in V are not necessarily accurate guides to changes in the aggregate-demand schedule. In a fractional-reserve system, movements of the investment and consumption functions may be expressed by expansion and contraction of M as well as by rises and falls in V. All that is required in the case of M's expansion is that excess reserves exist; and not even that is required when 11f falls. The implications that these conclusions have for statistical arguments concerning the lackof-investment-opportunity theory of recessions are obvious. Even if records were to show that