It was stated earlier that, with very few exceptions, the role of working capital in a stationary or dynamic structure of production has been neglected in modern literature. This is especially true of changes in a given stock of working capital and their integration with the overall process of adjustment to a higher rate of growth. We have briefly dealt with the problem in the context of our Bird's-Eye View of an Expanding Traverse, and shall now supplement these general comments by a schematic exposition of the step-by-step movements illustrated again in a numerical model. However, to facilitate understanding, we shall, first, discuss the salient points in literary terms.

Let us visualize the situation at the moment when expansion and, in particular, expansion of the initial stock of working capital is to begin. The influx of a new increment of labor supply and the concomitant appearance of additional savings have reduced the aggregate demand for consumer goods, displacing part of the labor force in Sector II and reducing demand for the output of Sector Ib, thus liberating part of the capital stock in Sector Ib for producing finished output other than secondary equipment. Assuming that a positive investment decision is forthcoming, this changed output in Sector Ib will henceforth consist of primary equipment, the embodiment of self-augmentation.

Now, this description in terms of sectoral aggregates is quite appropriate so long as our interest centers on the changes of finished output in the two equipment-good sectors – primary or secondary equipment.