§ Mr. Gouldasked the Chancellor of the Exchequer whether he will publish in the Official Report particulars of the change in the savings ratio referred to in paragraph 3.27 of his paper on wages and employment together with the consequential effect on interest rates and the exchange rate.
§ Mr. Peter ReesThe change in the saving ratio in the simulation referred to in paragraph 3.27 is shown below. The effects on interest rates and the exchange rate in this simulation are shown in Table A, Annex B of the paper by Treasury officials on "The Relationship between Employment and Wages".
Simulated effects of lower nominal wage,* unchanged nominal framework† Changes from base Saving ratio (percentage points) Year 1 -0.5 2 -0.2 3 0.1 4 0 * Nominal wages are reduced to the extent necessary to reduce real wages by 2 per cent. † Unchanged money supply (average of MO and £M3); unchanged PSBR/GDP ratio achieved by varying income tax; unchanged cash-limited expenditure in real terms.