er
;

PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 2%

being ‘imported; and complementary imports, m,, namely
goods like crude oil, raw cotton and wool, which are either
not produced in Britain at all or are produced there only in
relatively small quantities. We assume: that m, depends on
‘he amount of money available from export sales and income
received from abroad, after allowing for the necessary expenditure
 on complementary imports and for the sums required
for gifts or lending abroad; and that the elements of m, are
proportional to those of g, the vector of output levels. If we denote
 by B the balance of trade, that is the excess of the value of
exports, p'«, over the value of all imports, p*,m, + b*,m,,
where the p*’s denote vectors of foreign prices, then, following
the argument of [7],

m=m, +m,

‘IV. 26) = [a +p*,! a, (p'x-a', P*, q—B)] + a39

where the vector a, and a, contain the intercepts and slopes in

the linear equations assumed to connect the elements of p*, my
with their total, p*,"m,; and the elements of the vector a, are
the factors of proportionality relating the elements of m, to
the corresponding elements of gq. The only element of (IV. 26)
which is so far unknown is g. It can be worked out from a
revision of (IV. 1) which, with the complication of foreign
trade, can be expressed as

q=Ag+v+e+x—m,
(IV. 27) =(—A -playa, pl) [v+e+(I—p~ta,p) x
pa”

Third, we must allow for the fact that domestic prices are
now affected because some of the inputs into British production
come from abroad. Let each element of a vector % denote the

1]

Stone - pag. 54