This thesis tests whether a simple income-expenditure
model is a better predictor of induced
expenditure and thus income than a simple quantity
theory model. A spectral analysis was performed
using alternative definitions of money, income and
expenditure. From the results of cross spectral
analysis, it was concluded that the money supply
is the better predictor of short run (8 months -
3 years) fluctuations in consumption and thus in
income.