MRS. B

I TRUST that you now understand both the manner in which capital is accumulated, and the various modes of employing it to produce a revenue. It remains for us to examine how this revenue may be disposed of.

CAROLINE

I have already learnt that revenue may either be spent, or accumulated and converted into capital; and that the more a man economises for the latter purpose, the richer he becomes.

MRS. B

This observation is equally applicable to the capital of a country, which may be augmented by industry and frugality, or diminished by prodigality.

CAROLINE

The capital of a country, I think you said, consisted of the capital of its inhabitants taken collectively?

MRS. B

It does; but you must be careful not to estimate the revenue of a country in the same manner, for it would lead to very erroneous calculations. Let us for instance suppose my income to be 10,000l. a-year, and that I pay 500l. a-year for the rent of my house—it is plain that this 500l. constitutes a portion of the income of my landlord; and since therefore the same property, by being transferred from one to another, may successively form the income of several individuals, the revenue of the country cannot be estimated by the aggregate income of the people.

CAROLINE

And does not the same reasoning apply to the expenditure of a country; since the 500l. a-year which you spend in house-rent will be afterwards spent by your landlord in some other manner?