^{note (1) page 4} There is not much conflict of evidence about this. Income, output and expenditure figures all point to much the same answer.

^{note (2) page 4} See ‘Bank clearings as a measure of economic activity’, Bank of England Quarterly Bulletin, March 1965, page 32. The equation suggests, for the second quarter of 1965, only a slight rise in total final expenditure, in current prices. Given that there was a significant rise in final prices and also a large increase in imports, this points to a fall in output at constant prices.

^{note (1) page 6} There is no evidence of this in ‘other private industry's' investment. This might be because plant and machinery is a much smaller proportion of their investment; because non-industrial building in any case is not eligible for investment allowances; and because more of manufacturing industry's investment is controlled by large firms who would probably be more alive to the fiscal advantage of early payment.

^{note (2) page 6} In tables 1 and 2, these assumed movements are smoothed out.

^{note (1) page 11} This makes some allowance for the effect of the bad weather on investment in the first quarter of 1963.

^{note (2) page 11} In the process of forecasting, the preparation of this table requires a first guess at the movement of output and employment—a guess which is corrected later on in the second round of the forecast. These steps of successive approximation are omitted here.

^{note (3) page 11} The past movement of employment shown here is different from that shown in the Ministry of Labour Gazette, and in the Statistical Appendix, table 6. This is because there is good evidence that the figures will be heavily revised upwards again.

^{note (4) page 11} This does not show up in the official import price figures, which conceal a revaluation of sugar imports. Making allowance for this, the comparable unit value indices for total and food imports are these :

^{note (1) page 12} See National Institute Economic Review No. 32, May 1965, page 14, chart 5.

^{note (1) page 15} This included a fall in sterling balances of non-sterling countries of £59 million, of £14 million in the balance of international organisations, and a net outflow on other miscellaneous identified short-term transactions with the non-sterling area of £32 million.

^{note (2) page 15} This £179 million comprised an IMF drawing of £500 million in May, a receipt of £15 million from Switzerland (in addition to £28 million received before the beginning of the quarter), and net repayments to other countries of £336 million (£392 million repaid in May, less £56 million drawn in April).

^{note (3) page 15} The £857 million drawn, less net drawings by other countries, which amounted to £6 million at the end of May.

^{note (1) page 17} Whether devaluation would be a once-and-for-all change in level of this kind, or whether it would have a continuing stimulating effect on exports, is a disputed question which —since this measure is now politically excluded—we have not gone into here.

^{note (1) page 18} This figure of £140 million is not seasonally adjusted, whereas those in table 11, page 16, are adjusted. The second half of the year is less favourable.

^{note (1) page 19} The ‘capacity’ rate of growth is made up of the underlying trend of productivity and the increase in the labour force —both assuming that the short-period degree of utilisation of resources is held constant. Thus if the increase in output leads to a fall in unemployment, output is assumed to be rising above the capacity rate. The concept is described in ‘Long-term growth and short-term policy’ by W. A. H. Godley and J. R. Shepherd, National Institute Economic Review No. 29, August 1964, page 26. However, revisions to national output figures since that article was written suggest that the underlying trend of productivity was rising rather faster than the article suggested; revised calculations imply that by 1965 it may have been rising at a rate of around 3¼ per cent a year. From 1965 onwards, this underlying trend of productivity is assumed to continue to accelerate slightly; there is hardly any contribution to the growth of capacity from the labour force. An additional 1 per cent increase in output is allowed over the period 1967-70, to bring the unemployment percentage down from 2¼ to 2 per cent.

^{note (2) page 19} This calculation makes use of material prepared for the Institute's forthcoming publication, ‘The British Economy in 1975’ by W. Beckerman and Associates, to be published in September by the Cambridge University Press.

^{note (1) page 20} For a discussion of this point, see ‘Industrial Growth and World Trade’ by Alfred Maizels, a National Institute publication, Cambridge University Press, 1963.

^{note (2) page 20} There is evidence that with some markets at least Britain's share of trade tends to fall faster, the faster total trade increases (see R. S. Gilbert and R. L. Major, ‘Britain's falling share of sterling area imports’, National Institute Economic Review No. 14, March 1961, page 33). Also the slower growth assumption is based on the view that the slowing down in trade will be mainly in the imports of non-sterling area countries (see Alfred Maizels, ‘Industrial Growth and World Trade’, Cambridge University Press, 1963) in which Britain has a smaller share than in the imports of the overseas sterling area.

^{note (1) page 21} We assume that if exports were to rise at 6 per cent a year, fiscal policy would be adjusted to keep down the absorption of resources to meet home demand in such a way that the sum of exports and output for domestic use would keep the economy growing at the capacity rate.

^{note (2) page 21} Again, it is assumed that appropriate fiscal action would be used, to make room for the increased demand for home output resulting from the cut in imports, and so to keep output rising no faster than capacity.

^{note (3) page 21} It is assumed that 95 per cent of the ‘difference’ between the required and probable balance of payments results would come from reduced imports of goods, and the rest from reduced imports of services. Given the year-to-year distribution of the ‘required’ surplus (page 19), the cut in imports would have to be greater at the end of the period than at the beginning; but the distribution is arbitrary. More of the surplus could be obtained in the first two years, if appropriate.