This paper examines three interrelated questions central to effective monetary policy in 1968: 1 the present state of excess liquidity in the economy; 2 the required rate of expansion of the money supply in 1968; 3 the implications of such expansion for the monetary budget. The current liquidity position of the economy has been argued by many to be excessive. The principal basis for such a contention seems to be the substantial divergence between the December to December increase in the means of payments -- in excess of 42 per cent -- and a rate of increase of wholesale prices of almost half as much -- 21.7 per cent.24 p.