representing both saving and investment; so his exposition has three equations in three unknowns. And finally, since Keynes's discussion takes place in Chapter 14, it precedes the modification which makes liquidity preference depend on income as well as on the rate of interest. Once this modification has been made the unknowns can no longer be recovered sequentially. Keynesian economic intervention The state of the economy, according to Keynes, is determined by four parameters: the money supply, the demand functions for consumption (or equivalently for saving) and for liquidity, and the schedule of the marginal efficiency of capital determined by 'the existing quantity of equipment' and 'the state of long-term expectation' (p246).Adjusting the money supply is the domain of monetary policy. The effect of a change in the quantity of money is considered at p. 298. The change is effected in the first place in money units. According to Keynes's account on p. 295, wages will not change if there is any unemployment, with the result that the money supply will change to the same extent in wage units. We can then analyse its effect from the diagram, in which we see that an increase in M̂ shifts r̂ to the left, pushing Î upwards and leading to an increase in total income (and employment) whose size depends on the gradients of all 3 demand functions. If we look at the change in income as a function of the upwards shift of the schedule of the marginal efficiency of capital (blue curve), we see that as the level of investment is increased by one unit, the income must adjust so that the level of saving (red curve) is one unit greater, and hence the increase in income must be 1/S'(Y) units, i.e. k units. This is the explanation of Keynes's multiplier. It does not necessarily follow that individual decisions to invest will have a similar effect, since decisions to invest above the level suggested by the schedule of the marginal efficiency of capital are not the same thing as an increase in the schedule. The equations of Keynesian and classical economics Keynes's initial statement of his economic model (in Chapter 14) is based on his Chapter 13 theory of liquidity preference. His restatement in Chapter 18 doesn't take full account of his Chapter 15 revision, treating it as a source of 'repercussions' rather than as an integral component. It was left