ABSTRACT
Investment is the key to the business cycle and the Profit is the key to investment. The total or aggregate investment in the economy, as defined by the US Department of Commerce is private, gross, and domestic investment. The decision by a business to invest requires two things: the funds necessary to make the investment, and the motivation to invest, based on expectations of profit. This chapter has furnished a very powerful clue to the behavior of the economy: The economy is controlled by investment, but investment is based on the outlook for profit. Profit is the hero of economic expansion and the villain of slow growth and recession. In every business expansion, each business increases its inventories because it is optimistic that it will need more supplies of every kind. Manufacturers increase their supplies of raw materials and of semi-finished materials so that they may maintain a smooth production process.
