ABSTRACT
This chapter deals with each of the main catgories of investment separately when trying to discover their determinants. Investment in residential construction, which includes houses and apartments, is treated as a separate category for several reasons. Surveys of business behavior reveal that there are many factors that influence investment choices and that most firm managers do not consider the market interest rate a particularly important datum when making plans to acquire new plant and equipment. The Marginal Efficiency of Investment (MEI), then, falls as investment increases, and the limit to the demand for new machines will be reached when the MEI is reduced to equality with the rate of interest. If the demand for investment is largely income induced, then the MEI schedule will change its position every time National Income changes, so that investment could vary considerably even with a constant rate of interest.
