ABSTRACT
The market for capital goods is crucial to the economy. Since Adam Smith we know that capital goods are the important source of productivity growth, growth in the standard of living, and the wealth of nations. But capital goods may also have a negative effect on the economy. John Maynard Keynes contended that spending on capital goods, investment spending, is volatile and the cause of the business cycle. The market for capital goods is, accordingly, of great interest and importance. A basic assumption is that the supply of capital goods responds demand. As a result, the concern of this chapter is with the demand for capital goods. The demand for capital goods can be called the demand for investment goods.
