^{(page 11 note 1)} Admittedly including a 20 per cent fall in real defence spending.

^{(page 13 note 1)} It does not however, of course, imply that unemployment played no part in the bargaining process that led to the acceptance of the policy by the unions or in their continuing acceptance of it. Nor does it shed any light on whether, in the absence of the policy, wage inflation would have been reduced by the high unemployment.

^{(page 14 note 1)} The special article by A. J. H. Dean in this issue discusses this.

^{(page 14 note 2)} J. Johnston, ‘A macro-model of inflation’, Economic Journal, June 1975, shows the consequences of this for inflation measured by consumer prices.

^{(page 16 note 1)} In particular the Morgan Grenfell Economic Review for 9 September 1975 which drew attention to an astonishing, simple inverse correlation between the savings ratio and the liquid assets ratio.

^{(page 16 note 2)} The ratio is identified liquid assets net of bank advances (as in table 88 of Financial Statistics), divided by personal disposable income (current prices, quarterly rate). The relationship could be evidence of a ‘wealth’ effect or, perhaps more likely, a ‘portfolio balance’ effect on consumption. The long run effect of a 0.01 rise in the ratio on consumers' expenditure (quarterly rate, 1970 prices) is estimated at £5 1/2 million.

^{(page 18 note 1)} A point that has been made in the context of the inflation accounting debate (Times Business News, 18 September 1975) by Martin Gibbs of Phillips and Drew. They have estimated that, non-financial company profits as reported in 1974/5 are reduced by about 60 per cent, using the Sandilands Committee's Current Cost Accounting method, but that if allowance is made for the real gain on monetary assets the reduction is only 15 per cent (and in 1975/6 the effect is forecast to be an increase).

^{(page 19 note 1)} We did express our doubts about the original seasonal adjustment pattern in the February Review (p. 41).