"The time dimension that makes an explicit appearance on the horizontal line of the Hayekian triangle has a double interpretation. First, it can depict goods in process moving through time from the inception to the completion of the production process. Second, it can represent the separate stages of production, all of which exist in the present, each of which aims at consumption at different points in the future"
(Garrison, 2001, p. 47) |
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A = $100B (the wealth of the nation)
r = 10.0% (the real interest rate)
m = 10 years (the mean of the DWCS)
If the real interest rate drops below 10.0%, there is an increase in the value of capital dedicated to consumption more than ten years in the future and a decrease in the value of capital dedicated to consumption less than ten years in the future.
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