THE arguments or variables that enter the demand function for money, and the definition of the quantity of money appropriate for the demand function, have received substantial attention in both the recent and more distant past. For present purposes, it is useful to distinguish three separate disputes about these variables. First, there is the question of the constraint that is imposed on money balances-whether the appropriate constraint is a measure of wealth, income, or some combination of the two. A second dispute has centered on the importance of interest rates and price changes as arguments in the demand function. Third, the question of the definition of money balances has often been raised. Is a more stable demand function obtained if money is defined inclusive or exclusive of time and/or savings deposits, and perhaps other assets that have value fixed in money terms?

When by the improvement and cultivation of land... the labour of half the society becomes sufficient to provide food for the whole, the other half... can be employed... in satisfying the other wants and fancies of mankind.

In view of the American price level problems, which are currently much debated within the accounting profession, the attempted solutions of a similar problem in France should be of interest to American accountants. Following each of the two World Wars France experienced inflations far more severe than the slight inflationary price trends of the United States during the last twenty years. During the two decades following the First World War France went through a gradual but persistent inflation. In the years following the Second World War the inflationary trends assumed alarming proportions mainly because the several short-lived French governments of that time did not succeed in enforcing a sufficient degree of monetary discipline. French methods of revaluing assets attempted the elimination of price level effects from the financial statements by using price level coefficients, which were based on wholesale price indices of commodities, which largely determine the cost of most fixed assets. The French method, therefore, attempted to eliminate only inflationary price level effects of the selected commodities reflected in the revaluation coefficients. Price changes caused by shifts in demand or changes in technology are eliminated only when reflected in the combined index.

Reviews the book "A Theory of Accounting to Investors," by George J. Staubus.

Germany, in recent history, has experienced two serious inflations. Each was a consequence of her defeats in the two World Wars. Germany's industrial capacity survived World War I without suffering serious damages, but a large part of her production was used for reparations and never reached the domestic market. Internal political strife and occupation of a major industrial area by the victorious allied powers further reduced the production available for domestic consumption. During the years of inflation, sound financial reporting was almost impossible. Scholars and practicing accountants examined and experimented with various proposed methods of inflation accounting without discovering any fully satisfactory results. The German balance sheet law of 1948 represents an attempt to achieve uniform balance sheet values at current prices. Although the final results were not ideal, the overall purpose of establishing a new and sound basis for financial reporting and taxation was certainly attained. The financial statements of the years following the currency reform are somewhat distorted because in Germany, as in the United States, price levels have been rising gradually and consistently.

The article focuses on a procedure followed by practitioners of accounting for the method of inventory determination. The procedure is called dollar-value last in first out (LIFO), may be used to achieve the lowest obtainable final inventory for a manufacturing concern. The dollar-value method was developed in many companies to offset the perpetual inventory limitation of the use of LIFO. The dollar-value method uses a technique of double extension. In this way, ending inventory quantities are extended to two columns, one at current cost, the other at the cost of the base year, the first year that the LIFO method was used. In its effects, LIFO is income statement oriented. As current revenues are realized current cost factors (i.e., costs incurred at the same time as revenues were realized) are deducted immediately from revenues. The net effect is to make the stable monetary unit assumption into more of a reality on the income statement, thus eliminating much of the time lag between costs and revenues during which the value of dollars may change appreciably.

C URRENT controversy among economists on systems for recording and classifying Government transactions has focused largely on the choice between the Cash Budget on the one hand and the income and product account on the other; the Administrative Budget seems to have few friends in the profession. A good part of the controversy over budget concepts appears to exist mainly because the major types of Federal economic influence are not being distinguished sharply enough in discussion of the currently available measures of Government activities. In particular, GNPdeficit advocates look for the income and spending effects of Federal transactions, while the Cash Budget defenders seem to be looking principally for liquidity and financial market effects. Lending effects, meanwhile, have been largely left out of the discussion; they are usually mentioned only as an intrusive element of the cash deficit relative to income and spending effects. When lending is recognized as a separate and, at times, sizable force in the economy, and when the spending vs. liquidity distinction is kept in mind, we begin to have a basis for deciding which of the Federal budget figures to use in any particular discussion. What is proposed here is a framework within which each of the budget concepts can be integrated but still distinguished, permitting whatever focus of discussion is desired without foreclosing on the benefits of alternative perspectives. The framework is an adaptation of the account for the Federal Government sector in the Flow of Funds national accounting system developed at the Federal Reserve, and now available on a quarterly, seasonally adjusted basis. This adaptation is based on the following premises: first, no single number can possibly tell all or even very much about Federal economic influences, and we need a set of several figures even to begin to see a picture. Second, the accrual version of Federal transactions in income and product accounts tells more of non-financial influences than the cash version. Third, Federal financial transactionsboth lending and borrowing-are important channels through which the Government can and does influence economic developments and should be included explicitly in any accounting of Government activities. Fourth, lending is different from both borrowing and spending in influence and cannot reasonably be combined with either. Fifth, however, simplicity of presentation is essential if any new version of Government accounting is to achieve fairly widespread use. The form shown in the attached chart tries to meet the preferences and objectives stated above. It delineates in a minimum number of lines the major types of Governmental activities as they affect distinctively different types of economic activity: payments for goods and services and for transfers, receipts from tax revenues, Government lending, Government borrowing from the banking system, and borrowing from the public. A. The upper panel of the chart shows the Government's direct contribution to the spending stream and the amount it taps from this stream through taxes. Changes in the gross size and composition of both spending and revenues are at least as important for economic analysis as a net deficit or surplus on any accounting basis and deserve separate reporting. The figures plotted are those in the national income account, that is, they are the accrual version of Government spending and receipts. It would be definitely desirable, if space permitted, to distinguish spending for goods and services from transfer payments and to distinguish personal from business taxes, but as a * Views expressed here are those of the authors, and do not necessarily reflect the views of the Board of Governors of the Federal Reserve System. ressed here are those of the authors, an do sa il reflect the views of the Board of Governors