§ Mr. Austin Mitchellasked the Chancellor of the Exchequer whether paragraph 2 of the introduction to the Green Paper on monetary control means that the Government do not contemplate a revival of the British economy until the progressive reduction in the rate of monetary growth has been accomplished; if so, when he expects to complete the reduction; and if not, what it means in terms of practical policy.
§ Mr. LawsonNo; but any revival of the British economy will be sustainable418W only if the reduction in inflation is a permanent one. This means persisting with present policies.
§ Mr. Austin Mitchellasked the Chancellor of the Exchequer what is the period of years which he had in mind in paragraph 3 of the introduction of the Green Paper on monetary control; and if it is his view that in any shorter period the relationship between prices and the money stock can and does diverge significantly.
§ Mr. Lawson[pursuant to his reply, 7 August 1980]: The time over which the growth of the money stock and the growth of prices and incomes may diverge will vary. It depends crucially on how quickly behaviour takes account of the monetary environment. Certainly in the very short term the series can diverge significantly, as is shown by the short term fluctuations in the income velocity of circulation of money supply.