ABSTRACT
Price and quantity relationships, the heart of the micro theory, can be incorporated into macro analysis only by adding additional equations to the basic Keynesian model, and then the equations are likely to have an ad hoc empirical flavor detached from the ordinarily solid theoretical underpinnings of micro theory. The consumption and investment aggregates, on the other hand, the core of the macro theory, can be approached from a micro starting point only by derogating or ignoring the importance of many of the usual variables, and in that case the aesthetic balance of the general equilibrium system is likely to be lost. This investment demand function is based on two independent variables: the marginal efficiency of investment and the expected growth rate of industry sales. The gap between planned savings and planned investment in the oligopolistic sector must, under the circumstances, be filled by tapping the savings of the household sector.
