A method for macroeconomic consistency in current and constant prices

This paper extends earlier work on current-price budget identities to treat constant-price flow relations. It introduces relative prices and constant-prices values for all relevant output and aggregate demand components and permits a distinction between real variables and relative price changes. It also permits breaking the changes in asset and liability holding down into: (a) changes in real holdings; and (b) capital gains and losses due to inflation and exchange rate depreciation. This makes possible a distinction between savings and a change in real wealth or"adjusted"savings.