18 SOCIAL SCIENTIST (^ +AD ) == s - - - (15) 2 \ c2 But the existing capacity and resource constraints may not permit the production of so much output which can satisfy the equation (15) and therefore the total demand for constant capital would remain unsatisfied and the prices of the Department I and of industrial raw materials of agricultural origin would tend to rise. Thus an inflationary gap denoted by (^ +AD ) ~ S - g ... ... ... (16) 9 c c c 2 2 22 will be created. Those capitalists, who, by virtue of their sound economic position; will be able to satisfy their own demands for constant capital will be able to reach their pre-determined level of production, while the weaker capitalists will be placed at a great disadvantage. Due to weaker financial position they would fail to procure raw materials in sufficient quantity. Under such circumstances they may have to cut their production and underutlization of the existing capacity will begin at this level. The stronger capitalists will be able to effect, through this situation, redistribution of the social product in their favour. Their profits will be higher than before. Let us now suppose that there was no disequilibrium in Department II during period 2. But the higher profits secured by the stronger capitalists of Department I during period 2 would eventually increase their consumption expenditure in period 3. Thus the total demand for consumption goods in period 3 may increase to such an extent that the existing capacity and resource constraints and other factors may not permit the Department II and agricultural sector to meet the increased demand for consumption goods. Then the prices of products of consumer goods industries and consumable farm products would tend to increase, thereby creating an inflationary gap equal to /Dp + Dp \ — Sp == G^ ..................(17) [ ^3 ^ ) -3 ^3 where Du == increase in the demand for consumption goods arising out of higher ^3 profits secured by the stronger capitalists during period 2. If no additional money is injected into the economy for financing developmental programmes beyond the levc lot available resources during the period 3, at the same time suitable measures arc also not adopted to mitigate the inflationary pressure created in the previous period, the inflationary gap g may remain the same in period 3. Then the total inflationary gap in the whole economy of this period will be given by ^ + ^ ...........................(18) But the structural imbalance already created in Department I would give rise to some factors which may lead to further widening of the inflationary gap g because the c^ inflationary situation may create a serious difficulty in financing the new developmental programmes. If after tapping the normal internal sources, there remains a gap between the financial provisions and the proposed outlay, it would be further necessary to artificially inject another dose of additional money into the economy. If the injection of additional money goes beyond the level of available resources, which is most likely, the inflationary situation would be further aggravated and the inflationary gap in Department I will increase from g in period 2 to g in period 3. Then the °2 ^